UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒			Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended ~~July 4, 2021~~April 3, 2022 or


☐			Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from __________ to __________

Commission File Number 001-34218

COGNEX CORPORATION


(Exact name of registrant as specified in its charter)


Massachusetts						04-2713778
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

One Vision Drive

Natick, Massachusetts 01760-2059

(508) 650-3000


(Address, including zip code, and telephone number, including area code, of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $.002 per share	CGNX	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

☐

☒

As of ~~July 4, 2021,~~April 3, 2022, there were ~~176,707,164~~173,738,182 shares of Common Stock, $.002 par value per share, of the registrant outstanding.

INDEX


PART I	FINANCIAL INFORMATION	3

Item 1.	Financial Statements (interim periods unaudited)	3
	Consolidated Statements of Operations for the three-month ~~and~~ ~~six-month~~periods ended ~~July~~April 43 , 202 12 and JA~~une 28, 2020~~pril 4, 2021	3
	Consolidated Statements of Comprehensive Income for the three-month ~~and six-month~~ periods ended ~~July~~ 4A ~~, 202~~1pril 3, 2022 and ~~June 28, 2020~~April 4, 2021	4
	Consolidated Balance Sheets as of ~~July~~ ~~4, 2021~~April 3, 2022 and December 31, 202021	5
	Consolidated Statements of Cash Flows for the ~~six~~three -month periods ended ~~July~~ 4April 3, 202 12 and JA~~une 28, 2020~~pril 4, 2021	6
	Consolidated Statements of Shareholders’ Equity for the three-month ~~and six-month~~ periods ended ~~July~~ 4April 3,, 202 12 and JA~~une 28, 2020~~pril 4, 2021	7
	Notes to Consolidated Financial Statements	98

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2422

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2926

Item 4.	Controls and Procedures	3026

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	3127

Item 1A.	Risk Factors	3127

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3127

Item 3.	Defaults Upon Senior Securities	3127

Item 4.	Mine Safety Disclosures	3127

Item 5.	Other Information	3127

Item 6.	Exhibits	3228

	Signatures	3329

PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

COGNEX CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)


		Three-months Ended				Six-months Ended					Three-months Ended
		July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020			April 3, 2022		April 4, 2021
		(unaudited)				(unaudited)					(unaudited)
Revenue	Revenue	$	269,158	$	169,097	$	508,185	$	336,332	Revenue	$	282,407	$	239,027
Cost of revenue	Cost of revenue	68,432		50,320		122,477		91,520		Cost of revenue	78,790		54,045
Gross margin	Gross margin	200,726		118,777		385,708		244,812		Gross margin	203,617		184,982
Research, development, and engineering expenses	Research, development, and engineering expenses	31,302		30,397		65,407		66,343		Research, development, and engineering expenses	36,054		34,105
Selling, general, and administrative expenses	Selling, general, and administrative expenses	76,843		60,153		149,267		129,291		Selling, general, and administrative expenses	80,835		72,424
Restructuring charges (Note 16)		0		14,798		0		14,798
Intangible asset impairment charges (Note 8)		0		19,571		0		19,571
Operating income (loss)		92,581		(6,142)		171,034		14,809
Operating income										Operating income	86,728		78,453
Foreign currency gain (loss)	Foreign currency gain (loss)	(639)		336		(1,647)		(2,667)		Foreign currency gain (loss)	(444)		(1,008)
Investment income	Investment income	1,723		3,291		3,277		8,520		Investment income	1,468		1,554
Other income (expense)	Other income (expense)	(127)		203		(295)		20		Other income (expense)	(48)		(168)
Income (loss) before income tax expense (benefit)		93,538		(2,312)		172,369		20,682
Income tax expense (benefit)		15,940		(1,170)		24,923		1,347
Net income (loss)		$	77,598	$	(1,142)	$	147,446	$	19,335
Income before income tax expense										Income before income tax expense	87,704		78,831
Income tax expense										Income tax expense	20,371		8,983
Net income										Net income	$	67,333	$	69,848

Net income (loss) per weighted-average common and common-equivalent share:
Net income per weighted-average common and common-equivalent share:										Net income per weighted-average common and common-equivalent share:
Basic	Basic	$	0.44	$	(0.01)	$	0.84	$	0.11	Basic	$	0.39	$	0.40
Diluted	Diluted	$	0.43	$	(0.01)	$	0.82	$	0.11	Diluted	$	0.38	$	0.39

Weighted-average common and common-equivalent shares outstanding:	Weighted-average common and common-equivalent shares outstanding:									Weighted-average common and common-equivalent shares outstanding:
Basic	Basic	176,626		172,283		176,454		172,345		Basic	174,146		176,288
Diluted	Diluted	179,991		172,283		179,982		175,499		Diluted	176,668		179,971

Cash dividends per common share	Cash dividends per common share	$	0.060	$	0.055	$	0.120	$	0.110	Cash dividends per common share	$	0.065	$	0.060

The accompanying notes are an integral part of these consolidated financial statements.

COGNEX CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)


		Three-months Ended				Six-months Ended					Three-months Ended
		July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020			April 3, 2022		April 4, 2021
		(unaudited)				(unaudited)					(unaudited)
Net income (loss)		$	77,598	$	(1,142)	$	147,446	$	19,335
Net income										Net income	$	67,333	$	69,848
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:									Other comprehensive income (loss), net of tax:

Available-for-sale investments:	Available-for-sale investments:									Available-for-sale investments:
Net unrealized gain (loss), net of tax of $(61) and $(836) in the three-month periods and net of tax of $(646) and $(1,788) in the six-month periods, respectively		(138)		12,451		(2,096)		8,590
Reclassification of credit loss (recovery) on investments into current operations		0		(85)		0		75
Net unrealized gain (loss), net of tax of $(4,036) and $(585) in the three-month periods, respectively										Net unrealized gain (loss), net of tax of $(4,036) and $(585) in the three-month periods, respectively	(13,548)		(1,958)

Reclassification of net realized (gain) loss on the sale of available-for-sale investments into current operations	Reclassification of net realized (gain) loss on the sale of available-for-sale investments into current operations	(68)		(955)		(68)		(2,805)		Reclassification of net realized (gain) loss on the sale of available-for-sale investments into current operations	36		—
Net change related to available-for-sale investments	Net change related to available-for-sale investments	(206)		11,411		(2,164)		5,860		Net change related to available-for-sale investments	(13,512)		(1,958)

Foreign currency translation adjustments:	Foreign currency translation adjustments:									Foreign currency translation adjustments:
Foreign currency translation adjustments	Foreign currency translation adjustments	(337)		1,903		(3,107)		(5,462)		Foreign currency translation adjustments	(2,111)		(2,770)
Net change related to foreign currency translation adjustments	Net change related to foreign currency translation adjustments	(337)		1,903		(3,107)		(5,462)		Net change related to foreign currency translation adjustments	(2,111)		(2,770)

Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	(543)		13,314		(5,271)		398		Other comprehensive income (loss), net of tax	(15,623)		(4,728)
Total comprehensive income	Total comprehensive income	$	77,055	$	12,172	$	142,175	$	19,733	Total comprehensive income	$	51,710	$	65,120

The accompanying notes are an integral part of these consolidated financial statements.

COGNEX CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands)

July 4, 2021 December 31, 2020
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 217,037 $ 269,073
Current investments, amortized cost of $189,818 and $102,258 in 2021 and 2020, respectively, allowance for credit losses of $0 in 2021 and 2020 190,747 103,240
Accounts receivable, allowance for credit losses of $803 and $831 in 2021 and 2020, respectively 149,157 125,696
Unbilled revenue 1,788 5,632
Inventories 68,503 60,830
Prepaid expenses and other current assets 65,646 37,220
Total current assets 692,878 601,691
Non-current investments, amortized cost of $542,015 and $390,417 in 2021 and 2020, respectively, allowance for credit losses of $0 in 2021 and 2020 543,965 395,125
Property, plant, and equipment, net 76,972 79,173
Operating lease assets 21,277 22,582
Goodwill 242,906 244,078
Intangible assets, net 13,702 15,555
Deferred income taxes 425,618 434,704
Other assets 7,603 7,794
Total assets $ 2,024,921 $ 1,800,702
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 32,304 $ 16,270
Accrued expenses 76,653 77,264
Accrued income taxes 11,644 9,379
Deferred revenue and customer deposits 76,445 21,274
Operating lease liabilities 7,888 8,110
Total current liabilities 204,934 132,297
Non-current operating lease liabilities 16,362 18,120
Deferred income taxes 306,355 314,952
Reserve for income taxes 15,227 14,257
Non-current accrued income taxes 40,963 48,915
Other liabilities 11,626 9,959
Total liabilities 595,467 538,500
Shareholders’ equity:
Preferred stock, $.01 par value – Authorized: 400 shares in 2021 and 2020, respectively, 0 shares issued and outstanding 0 0
Common stock, $.002 par value – Authorized: 300,000 shares in 2021 and 2020, respectively, issued and outstanding: 176,707 and 175,790 shares in 2021 and 2020, respectively 353 352
Additional paid-in capital 874,883 807,739
Retained earnings 593,290 487,912
Accumulated other comprehensive loss, net of tax (39,072) (33,801)
Total shareholders’ equity 1,429,454 1,262,202
Total liabilities and shareholders' equity $ 2,024,921 $ 1,800,702


	April 3, 2022		December 31, 2021
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	165,769	$	186,161
Current investments, amortized cost of $149,574 and $137,124 in 2022 and 2021, respectively, allowance for credit losses of $0 in 2022 and 2021	148,966		137,455
Accounts receivable, allowance for credit losses of $766 and $776 in 2022 and 2021, respectively	155,065		130,348
Unbilled revenue	1,847		3,990
Inventories	136,660		113,102
Prepaid expenses and other current assets	64,573		68,742
Total current assets	672,880		639,798
Non-current investments, amortized cost of $500,273 and $587,981 in 2022 and 2021, respectively, allowance for credit losses of $0 in 2022 and 2021	479,429		583,748
Property, plant, and equipment, net	77,870		77,546
Operating lease assets	32,217		23,157
Goodwill	241,180		241,713
Intangible assets, net	11,048		11,888
Deferred income taxes	412,333		418,570
Other assets	7,158		7,242
Total assets	$	1,934,115	$	2,003,662

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	44,733	$	44,051
Accrued expenses	63,122		92,432
Accrued income taxes	24,465		8,577
Deferred revenue and customer deposits	54,455		35,743
Operating lease liabilities	8,351		7,786
Total current liabilities	195,126		188,589
Non-current operating lease liabilities	26,179		17,795
Deferred income taxes	279,729		293,769
Reserve for income taxes	15,110		14,780
Non-current accrued income taxes	44,010		43,160
Other liabilities	15,216		15,476
Total liabilities	575,370		573,569

Commitments and contingencies (Note 10)
Shareholders’ equity:
Preferred stock, $.01 par value – Authorized: 400 shares in 2022 and 2021, respectively; no shares issued and outstanding	—		—
Common stock, $.002 par value – Authorized: 300,000 shares in 2022 and 2021, respectively; issued and outstanding: 173,738 and 175,481 shares in 2022 and 2021, respectively	347		351
Additional paid-in capital	933,452		914,802
Retained earnings	488,511		562,882
Accumulated other comprehensive loss, net of tax	(63,565)		(47,942)
Total shareholders’ equity	1,358,745		1,430,093
Total liabilities and shareholders' equity	$	1,934,115	$	2,003,662

The accompanying notes are an integral part of these consolidated financial statements.

COGNEX CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


		Six-months Ended					Three-months Ended
		July 4, 2021		June 28, 2020			April 3, 2022		April 4, 2021
		(unaudited)					(unaudited)
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	147,446	$	19,335	Net income	$	67,333	$	69,848
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense	Stock-based compensation expense	22,739		22,808		Stock-based compensation expense	15,056		12,009
Depreciation of property, plant, and equipment	Depreciation of property, plant, and equipment	8,510		11,162		Depreciation of property, plant, and equipment	4,117		4,259
Loss on disposal of property, plant, and equipment		4		1,214
Loss (gain) on disposal of property, plant, and equipment						Loss (gain) on disposal of property, plant, and equipment	—		3
Amortization of intangible assets	Amortization of intangible assets	1,853		2,582		Amortization of intangible assets	840		927
Intangible asset impairment charges		0		19,571
Excess and obsolete inventory charges	Excess and obsolete inventory charges	1,816		8,783		Excess and obsolete inventory charges	379		705
Operating lease asset impairment charges		0		2,534
Amortization of discounts or premiums on investments	Amortization of discounts or premiums on investments	1,840		328		Amortization of discounts or premiums on investments	1,402		586
Realized gain on sale of investments		(68)		(2,805)
Credit loss on investments		0		75
Revaluation of contingent consideration		0		(114)
Realized loss (gain) on sale of investments						Realized loss (gain) on sale of investments	36		—

Change in deferred income taxes	Change in deferred income taxes	973		1,395		Change in deferred income taxes	(3,891)		1,250
Change in operating assets and liabilities:	Change in operating assets and liabilities:					Change in operating assets and liabilities:
Accounts receivable	Accounts receivable	(23,488)		(8,957)		Accounts receivable	(24,700)		(3,495)
Unbilled revenue	Unbilled revenue	3,844		3,804		Unbilled revenue	2,144		3,958
Inventories	Inventories	(9,521)		(1,664)		Inventories	(23,900)		(1,323)

Prepaid expenses and other current assets	Prepaid expenses and other current assets	(28,830)		(25,461)		Prepaid expenses and other current assets	4,212		(10,882)
Accounts payable	Accounts payable	16,058		143		Accounts payable	708		4,760
Accrued expenses	Accrued expenses	206		15,806		Accrued expenses	(28,718)		(15,973)
Accrued income taxes	Accrued income taxes	(5,588)		(25,411)		Accrued income taxes	16,745		1,651
Deferred revenue and customer deposits	Deferred revenue and customer deposits	55,220		32,586		Deferred revenue and customer deposits	18,712		30,641
Other	Other	1,711		(1,534)		Other	(958)		(285)
Net cash provided by operating activities	Net cash provided by operating activities	194,725		76,180		Net cash provided by operating activities	49,517		98,639
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of investments	Purchases of investments	(511,625)		(317,540)		Purchases of investments	(39,155)		(298,911)
Maturities and sales of investments	Maturities and sales of investments	270,696		387,765		Maturities and sales of investments	112,976		160,552
Purchases of property, plant, and equipment	Purchases of property, plant, and equipment	(6,550)		(6,985)		Purchases of property, plant, and equipment	(4,585)		(2,436)

Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	(247,479)		63,240		Net cash provided by (used in) investing activities	69,236		(140,795)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Net proceeds from issuance of common stock under stock plans	Net proceeds from issuance of common stock under stock plans	44,407		48,235		Net proceeds from issuance of common stock under stock plans	3,594		34,744
Repurchase of common stock	Repurchase of common stock	(20,877)		(51,036)		Repurchase of common stock	(130,405)		(6,479)
Payment of dividends	Payment of dividends	(21,192)		(18,972)		Payment of dividends	(11,303)		(10,595)
Payment of contingent consideration		0		(1,039)

Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	2,338		(22,812)		Net cash provided by (used in) financing activities	(138,114)		17,670
Effect of foreign exchange rate changes on cash and cash equivalents	Effect of foreign exchange rate changes on cash and cash equivalents	(1,620)		(2,018)		Effect of foreign exchange rate changes on cash and cash equivalents	(1,031)		(1,899)
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(52,036)		114,590		Net change in cash and cash equivalents	(20,392)		(26,385)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	269,073		171,431		Cash and cash equivalents at beginning of period	186,161		269,073
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	217,037	$	286,021	Cash and cash equivalents at end of period	$	165,769	$	242,688

The accompanying notes are an integral part of these consolidated financial statements.

COGNEX CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

Common Stock Additional
Paid-in Capital Retained Earnings Accumulated
Other
Comprehensive
Loss Total
Shareholders’
Equity
Shares Par Value
Balance as of April 4, 2021 176,608 $ 353 $ 854,491 $ 540,686 $ (38,529) $ 1,357,001
Net issuance of common stock under stock plans 277 1 9,662 — — 9,663
Repurchase of common stock (178) (1) — (14,397) — (14,398)
Stock-based compensation expense — — 10,730 — — 10,730
Payment of dividends ($0.060 per common share) — — — (10,597) — (10,597)
Net income — — — 77,598 — 77,598
Net unrealized gain (loss) on available-for-sale investments, net of tax of $(61) — — — — (138) (138)
Reclassification of net realized (gain) loss on the sale of available-for-sale investments — — — — (68) (68)
Foreign currency translation adjustment — — — — (337) (337)
Balance as of July 4, 2021 (unaudited) 176,707 $ 353 $ 874,883 $ 593,290 $ (39,072) $ 1,429,454

Common Stock Additional
Paid-in Capital Retained Earnings Accumulated
Other
Comprehensive
Loss Total
Shareholders’
Equity
Shares Par Value
Balance as of March 29, 2020 171,688 $ 344 $ 664,132 $ 713,208 $ (50,191) $ 1,327,493
Net issuance of common stock under stock plans 1,359 2 38,262 — — 38,264
Stock-based compensation expense — — 8,018 — — 8,018
Payment of dividends ($0.055 per common share) — — — (9,469) — (9,469)
Net income (loss) — — — (1,142) — (1,142)
Net unrealized gain (loss) on available-for-sale investments, net of tax of $(836) — — — — 12,451 12,451
Reclassification of credit loss (recovery) on investments — — — — (85) (85)
Reclassification of net realized (gain) loss on the sale of available-for-sale investments — — — — (955) (955)
Foreign currency translation adjustment — — — — 1,903 1,903
Balance as of June 28, 2020 (unaudited) 173,047 $ 346 $ 710,412 $ 702,597 $ (36,877) $ 1,376,478


	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
	Shares	Par Value
Balance as of December 31, 2021	175,481	$	351	$	914,802	$	562,882	$	(47,942)	$	1,430,093
Net issuance of common stock under stock plans	136	—		3,594		—		—		3,594
Repurchase of common stock	(1,879)	(4)		—		(130,401)		—		(130,405)
Stock-based compensation expense	—	—		15,056		—		—		15,056
Payment of dividends ($0.065 per common share)	—	—		—		(11,303)		—		(11,303)
Net income	—	—		—		67,333		—		67,333


Net unrealized gain (loss) on available-for-sale investments, net of tax of $(4,036)	—	—		—		—		(13,548)		(13,548)

Reclassification of net realized (gain) loss on the sale of available-for-sale investments	—	—		—		—		36		36
Foreign currency translation adjustment	—	—		—		—		(2,111)		(2,111)
Balance as of April 3, 2022 (unaudited)	173,738	$	347	$	933,452	$	488,511	$	(63,565)	$	1,358,745


	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
	Shares	Par Value
Balance as of December 31, 2020	175,790	$	352	$	807,739	$	487,912	$	(33,801)	$	1,262,202
Net issuance of common stock under stock plans	898	1		34,743		—		—		34,744
Repurchase of common stock	(80)	—		—		(6,479)		—		(6,479)
Stock-based compensation expense	—	—		12,009		—		—		12,009
Payment of dividends ($0.060 per common share)	—	—		—		(10,595)		—		(10,595)
Net income	—	—		—		69,848		—		69,848


Net unrealized gain (loss) on available-for-sale investments, net of tax of $(585)	—	—		—		—		(1,958)		(1,958)


Foreign currency translation adjustment	—	—		—		—		(2,770)		(2,770)
Balance as of April 4, 2021 (unaudited)	176,608	$	353	$	854,491	$	540,686	$	(38,529)	$	1,357,001

The accompanying notes are an integral part of these consolidated financial statements.

~~COGNEX CORPORATION~~

~~CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY~~

~~(In thousands)~~

Common Stock Additional
Paid-in Capital Retained Earnings Accumulated
Other
Comprehensive
Loss Total
Shareholders’
Equity
Shares Par Value
Balance as of December 31, 2020 175,790 $ 352 $ 807,739 $ 487,912 $ (33,801) $ 1,262,202
Net issuance of common stock under stock plans 1,175 2 44,405 — — 44,407
Repurchase of common stock (258) (1) — (20,876) — (20,877)
Stock-based compensation expense — — 22,739 — — 22,739
Payment of dividends ($0.120 per common share) — — — (21,192) — (21,192)
Net income — — — 147,446 — 147,446
Net unrealized gain (loss) on available-for-sale investments, net of tax of $(646) — — — — (2,096) (2,096)
Reclassification of net realized (gain) loss on the sale of available-for-sale investments — — — — (68) (68)
Foreign currency translation adjustment — — — — (3,107) (3,107)
Balance as of July 4, 2021 (unaudited) 176,707 $ 353 $ 874,883 $ 593,290 $ (39,072) $ 1,429,454

Common Stock Additional
Paid-in Capital Retained Earnings Accumulated
Other
Comprehensive
Loss Total
Shareholders’
Equity
Shares Par Value
Balance as of December 31, 2019 172,440 $ 345 $ 639,372 $ 753,268 $ (37,275) $ 1,355,710
Net issuance of common stock under stock plans 1,822 3 48,232 — — 48,235
Repurchase of common stock (1,215) (2) — (51,034) — (51,036)
Stock-based compensation expense — — 22,808 — — 22,808
Payment of dividends ($0.110 per common share) — — — (18,972) — (18,972)
Net income — — — 19,335 — 19,335
Net unrealized gain (loss) on available-for-sale investments, net of tax of $(1,788) — — — — 8,590 8,590
Reclassification of credit loss (recovery) on investments — — — — 75 75
Reclassification of net realized (gain) loss on the sale of available-for-sale investments — — — — (2,805) (2,805)
Foreign currency translation adjustment — — — — (5,462) (5,462)
Balance as of June 28, 2020 (unaudited) 173,047 $ 346 $ 710,412 $ 702,597 $ (36,877) $ 1,376,478

~~The accompanying notes are an integral part of these consolidated financial statements.~~

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1: Summary of Significant Accounting Policies

As permitted by the rules of the Securities and Exchange Commission applicable to Quarterly Reports on Form 10-Q, these notes are condensed and do not contain all disclosures required by generally accepted accounting principles (GAAP). Reference should be made to the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 for a full description of other significant accounting policies.

In the opinion of the management of Cognex Corporation (the "Company"), the accompanying consolidated unaudited financial statements contain all adjustments, consisting of normal, recurring adjustments, ~~excess and obsolete inventory charges (Note 5), intangible asset impairment charges (Note 8), restructuring charges (Note 16)~~ and financial statement reclassifications necessary to present fairly the Company’s financial position as of ~~July 4, 2021,~~April 3, 2022, and the results of its operations for the three-month ~~and six-month~~ periods ended ~~July~~April 3, 2022 and April 4, 2021, ~~and June 28, 2020,~~ and changes in shareholders’ equity, comprehensive income, and cash flows for the periods presented.

The results disclosed in the Consolidated Statements of Operations for the three-month ~~and six-month periods~~period ended ~~July 4, 2021~~April 3, 2022 are not necessarily indicative of the results to be expected for the full year.

NOTE 2: New Pronouncements

~~Accounting Standards Update (ASU) 2019-12, "Simplifying the Accounting for Income Taxes"~~

The amendments in this ASU eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. They also clarify and simplify other aspects of the accounting for income taxes. The Company adopted ASU 2019-12 on January 1, 2021. Upon adoption, ASU 2019-12 did not have a material impact on the Company's consolidated financial statements and disclosures.

~~Accounting Standards Update (ASU) 2020-08, "Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs"~~

The amendments in this ASU clarify that for each reporting period, for callable debt with multiple call dates and call prices that may change at each call date, to the extent that the amortized cost basis of an individual callable debt security exceeds the amount repayable by the issuer at the next call date, the excess is amortized to the next call date. The Company adopted ASU 2020-08 on January 1, 2021. Upon adoption, ASU 2020-08 did not have a material impact on the Company's consolidated financial statements and disclosures.

Accounting Standards Update (ASU) 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" and (ASU) 2021-01, "Reference Rate Reform (Topic 848): Scope"

The amendments in these ASUs apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. Together, the ASUs provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments in these ASUs are effective for all entities as of March 12, 2020 through December 31, 2022. Management does not expect ASU 2020-04 or ASU 2021-01 to have a material impact on the Company's consolidated financial statements and disclosures.

Accounting Standards Update (ASU) 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers"

The amendments in this ASU primarily address the accounting for contract assets and contract liabilities related to revenue contracts with customers in a business combination. The ASU clarifies that an acquirer should account for the related revenue contracts in accordance with Accounting Standards Codification 606 as if the acquirer had originated the contracts. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, although early adoption is permitted. The amendments in the ASU should be applied prospectively to business combinations occurring on or after the effective date of the amendments. The expected financial statement impact of this new accounting standard cannot be reasonably estimated at this time, as the impact in future periods will depend on the contract assets and contract liabilities acquired in future business combinations. Management does not expect this ASU to have a material impact on the Company's disclosures.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 3: Fair Value Measurements

Financial Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

The following table summarizes the financial assets and liabilities required to be measured at fair value on a recurring basis as of ~~July 4, 2021~~April 3, 2022 (in thousands):

Quoted Prices in
Active Markets
for Identical
Assets (Level 1) Significant Other
Observable
Inputs (Level 2) Unobservable Inputs (Level 3)
Assets:
Money market instruments $ 200 0 $ 0
Corporate bonds 0 482,236 0
Treasury bills 0 130,961 0
Asset-backed securities 0 90,265 0
Agency bonds 0 18,960 0
Municipal bonds 0 6,997 0
Sovereign bonds 0 5,293 0
Economic hedge forward contracts 0 47 0
Liabilities:
Economic hedge forward contracts 0 585 0


	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets:
Money market instruments	$	483	$	—	$	—
Corporate bonds	—		512,138		—
Asset-backed securities	—		73,295		—
Treasury bills	—		27,588		—

Agency bonds	—		18,635		—
Sovereign bonds	—		2,007		—
Municipal bonds	—		1,733		—




Economic hedge forward contracts	—		42		—
Liabilities:

Economic hedge forward contracts	—		441		—

The Company’s money market instruments are reported at fair value based upon the daily market price for identical assets in active markets, and are therefore classified as Level 1.

The Company’s debt securities and forward contracts are reported at fair value based on model-driven valuations in which all significant inputs are observable or can be derived from or corroborated by observable market data for substantially the full term of the asset or liability, and are therefore classified as Level 2. Management is responsible for estimating the fair value of these financial assets and liabilities, and in doing so, considers valuations provided by a large, third-party pricing service. For debt securities, this service maintains regular contact with market makers, brokers, dealers, and analysts to gather information on market movement, direction, trends, and other specific data. They use this information to structure yield curves for various types of debt securities and arrive at the daily valuations. The Company's forward contracts are typically traded or executed in over-the-counter markets with a high degree of pricing transparency. The market participants are generally large commercial banks.

The Company's contingent consideration liabilities are reported at fair value based upon probability-adjusted present values of the consideration expected to be paid using significant inputs that are not observable in the market, and are therefore classified as Level 3. Key assumptions used in these estimates include probability assessments with respect to the likelihood of achieving certain revenue milestones. The fair values of these contingent consideration liabilities were calculated using discount rates consistent with the level of risk of achievement, and are remeasured each reporting period.

~~The~~ fair value of the contingent consideration liability related to the Company's acquisition of GVi Ventures, Inc. in 2017 was written down to 0zero in 2019 resulting from a lower level of revenue in the Americas' automotive ~~industry, and the~~industry. The balance ~~remains~~remained at 0zero as of ~~July 4, 2021. The undiscounted potential outcomes related to future contingent consideration range from $0 to $2,500,000 based upon certain revenue levels over~~April 3, 2022 and through the ~~next year.~~

~~COGNEX CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

remainder of the five-year assessment period which concluded in April 2022.

Non-financial Assets that are Measured at Fair Value on a Non-recurring Basis

Non-financial assets, such as property, plant and equipment, operating lease assets, goodwill, and intangible assets, are required to be measured at fair value only when an impairment loss is recognized. The Company ~~evaluates these long-lived assets for impairment whenever events or changes in circumstances, referred to as "triggering events," indicate the carrying value may~~did not be recoverable. The adverse impact of the COVID-19 pandemic on our business in 2020 triggered a review of long-lived assets for potential impairment as of May 26, 2020, which resulted in operating lease assetrecord impairment charges ~~of $2,534,000 (refer~~related to ~~Notes 6 and 16) that were included in "Restructuring charges" on~~non-financial assets during the Consolidated Statements of Operations, and intangible asset impairment charges of $19,571,000 (refer to Note 8) in the second quarter of 2020. These fair value measurements were based upon the present values of future cash flows using significant inputs that were not observable in the market, and were therefore classified as Level 3.three-month periods ended April 3, 2022 or April 4, 2021.

No triggering event occurred in the six-month period ended July 4, 2021 that would indicate a potential impairment of long-lived assets. However, the Company continues to monitor global economic conditions, as events or changes in circumstances could result in an impairment of long-lived assets in a future period.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 4: Cash, Cash Equivalents, and Investments

Cash, cash equivalents, and investments consisted of the following (in thousands):


		July 4, 2021		December 31, 2020			April 3, 2022		December 31, 2021
Cash	Cash	$	216,837	$	266,609	Cash	$	158,285	$	185,624

Treasury bills						Treasury bills	7,001		—
Money market instruments	Money market instruments	200		2,464		Money market instruments	483		537
Cash and cash equivalents	Cash and cash equivalents	217,037		269,073		Cash and cash equivalents	165,769		186,161
Corporate bonds						Corporate bonds	97,772		73,088
Asset-backed securities						Asset-backed securities	37,084		37,655
Treasury bills	Treasury bills	92,939		35,403		Treasury bills	10,204		18,912
Corporate bonds		66,452		32,714
Agency bonds						Agency bonds	2,801		2,802
Municipal bonds						Municipal bonds	1,105		4,998

Asset-backed securities		24,756		25,160
Sovereign bonds		4,196		8,660
Municipal bonds		2,404		1,303

Current investments	Current investments	190,747		103,240		Current investments	148,966		137,455
Corporate bonds	Corporate bonds	415,784		203,428		Corporate bonds	414,366		481,218
Asset-backed securities	Asset-backed securities	65,509		67,058		Asset-backed securities	36,211		43,940
Agency bonds						Agency bonds	15,834		16,077
Treasury bills	Treasury bills	38,022		96,458		Treasury bills	10,383		39,753
Agency bonds		18,960		19,006
Sovereign bonds						Sovereign bonds	2,007		2,119
Municipal bonds	Municipal bonds	4,593		5,735		Municipal bonds	628		641
Sovereign bonds		1,097		3,440

Non-current investments	Non-current investments	543,965		395,125		Non-current investments	479,429		583,748
		$	951,749	$	767,438		$	794,164	$	907,364

Cash equivalents are highly liquid investments with insignificant interest rate risk and maturities of ninety days or less at the time of acquisition. Cash equivalents consist primarily of government and institutional money market funds; treasuryTreasury bills consist of debt securities issued by the U.S. government; corporate bonds consist of debt securities issued by both domestic and foreign companies; asset-backed securities consist of debt securities collateralized by pools of receivables or loans with credit enhancement; ~~sovereign bonds consist of direct debt issued by foreign governments; municipal bonds consist of debt securities issued by state and local government entities; and~~ agency bonds consist of domestic or foreign obligations of government agencies and government-sponsored enterprises that have government ~~backing.~~backing; municipal bonds consist of debt securities issued by state and local government entities; and sovereign bonds consist of direct debt issued by foreign governments. All of the Company's securities as of ~~July 4, 2021~~April 3, 2022 and December 31, ~~2020~~2021 were denominated in U.S. Dollars.

~~COGNEX CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

Accrued interest receivable is recorded in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to ~~$2,992,000~~$2,940,000 and ~~$1,560,000~~$3,037,000 as of ~~July 4, 2021~~April 3, 2022 and December 31, ~~2020,~~2021, respectively.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table summarizes the Company’s available-for-sale investments as of ~~July 4, 2021~~April 3, 2022 (in thousands):


		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Current:	Current:									Current:
Treasury bills		$	92,502	$	437	$	0	$	92,939
Corporate bonds	Corporate bonds	66,164		291		(3)		66,452		Corporate bonds	$	98,122	$	58	$	(408)	$	97,772
Asset-backed securities	Asset-backed securities	24,562		197		(3)		24,756		Asset-backed securities	37,300		12		(228)		37,084

Sovereign bonds		4,189		7		0		4,196
Treasury bills										Treasury bills	10,247		—		(43)		10,204
Agency bonds										Agency bonds	2,800		1		—		2,801
Municipal bonds	Municipal bonds	2,401		3		0		2,404		Municipal bonds	1,105		—		—		1,105

Non-current:	Non-current:									Non-current:
Corporate bonds	Corporate bonds	414,453		1,874		(543)		415,784		Corporate bonds	433,204		8		(18,846)		414,366
Asset-backed securities	Asset-backed securities	65,276		315		(82)		65,509		Asset-backed securities	37,579		—		(1,368)		36,211
Agency bonds										Agency bonds	16,133		—		(299)		15,834
Treasury bills	Treasury bills	37,677		345		0		38,022		Treasury bills	10,592		1		(210)		10,383
Agency bonds		18,921		39		0		18,960
Sovereign bonds										Sovereign bonds	2,130		—		(123)		2,007
Municipal bonds	Municipal bonds	4,592		12		(11)		4,593		Municipal bonds	635		—		(7)		628
Sovereign bonds		1,096		1		0		1,097
		$	731,833	$	3,521	$	(642)	$	734,712		$	649,847	$	80	$	(21,532)	$	628,395

The following table summarizes the Company’s gross unrealized losses and fair values for available-for-sale investments in an unrealized loss position as of ~~July 4, 2021~~April 3, 2022 (in thousands):


		Unrealized Loss Position For:													Unrealized Loss Position For:
		Less than 12 Months				12 Months or Greater				Total					Less than 12 Months				12 Months or Greater				Total
		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Corporate bonds	Corporate bonds	$	179,565	$	(546)	$	0	$	0	$	179,565	$	(546)	Corporate bonds	$	425,643	$	(17,258)	$	45,219	$	(1,996)	$	470,862	$	(19,254)

Asset-backed securities	Asset-backed securities	13,088		(85)		0		0		13,088		(85)		Asset-backed securities	65,603		(1,592)		556		(4)		66,159		(1,596)
Treasury bills														Treasury bills	15,982		(250)		102		(3)		16,084		(253)
Agency bonds														Agency bonds	15,834		(299)		—		—		15,834		(299)
Sovereign bonds														Sovereign bonds	2,007		(123)		—		—		2,007		(123)
Municipal bonds	Municipal bonds	3,946		(11)		0		0		3,946		(11)		Municipal bonds	1,733		(7)		—		—		1,733		(7)

															$	526,802	$	(19,529)	$	45,877	$	(2,003)	$	572,679	$	(21,532)

		$	196,599	$	(642)	$	0	$	0	$	196,599	$	(642)

~~The Company's~~Management monitors debt securities that are in an unrealized loss position to determine whether a loss exists related to the credit quality of the issuer. When developing an estimate of expected credit losses, management considers all relevant information including historical experience, current conditions, and reasonable forecasts of expected future cash flows. Based on this evaluation, 0 allowance for credit losses on debt securities was 0recorded as of ~~July 4, 2021 and~~April 3, 2022 or December 31, ~~2020.~~2021. There was 0 activity recorded in the allowance for credit losses during the three-month ~~and six-month~~ periods ended ~~July~~April 3, 2022 or April 4, 2021. The Company recorded gross credit losses and gross credit recoveries totaling $0 and $85,000, respectively, for the three-month period ended June 28, 2020, and $160,000 and $85,000, respectively, for the six-month period ended June 28, 2020.

The Company recorded gross realized gains and ~~gross realized~~ losses on the sale of debt securities totaling ~~$68,000~~$118,000 and ~~$0,~~$154,000, respectively, for ~~both~~ the three-month period ended April 3, 2022, and ~~six-month periods ended July 4, 2021. The Company recorded~~0 gross realized gains ~~and gross realized~~or losses on the sale of debt securities ~~totaling $962,000 and $7,000, respectively,~~ for the three-month period ended ~~June 28, 2020, and $2,826,000 and $21,000, respectively, for the six-month period ended June 28, 2020. These~~April 4, 2021. Realized gains and losses are included in "Investment income" on the Consolidated Statements of Operations. Prior to the sale of these securities, unrealized gains and losses for these debt securities, net of tax, ~~are~~were recorded in shareholders’ equity as accumulated other comprehensive loss.

1211

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table presents the effective maturity dates of the Company’s available-for-sale investments as of ~~July 4, 2021~~April 3, 2022 (in thousands):

<1 year 1-2 Years 2-3 Years 3-4 Years 4-5 Years 5-8 Years Total
Corporate bonds $ 66,452 $ 161,596 $ 139,870 $ 77,234 $ 30,143 $ 6,941 $ 482,236
Treasury bills 92,939 37,917 105 0 0 0 130,961
Asset-backed securities 24,756 30,896 20,090 9,510 0 5,013 90,265
Agency bonds 0 18,960 0 0 0 0 18,960
Municipal bonds 2,404 4,593 0 0 0 0 6,997
Sovereign bonds 4,196 0 0 0 1,097 0 5,293
$ 190,747 $ 253,962 $ 160,065 $ 86,744 $ 31,240 $ 11,954 $ 734,712


	<1 year		1-2 Years		2-3 Years		3-4 Years		4-5 Years		Total
Corporate bonds	$	97,772	$	175,124	$	168,060	$	47,259	$	23,923	$	512,138
Asset-backed securities	37,084		21,883		—		14,328		—		73,295
Treasury bills	10,204		10,383		—		—		—		20,587


Agency bonds	2,801		15,834		—		—		—		18,635
Sovereign bonds	—		—		1,007		1,000		—		2,007
Municipal bonds	1,105		628		—		—		—		1,733


	$	148,966	$	223,852	$	169,067	$	62,587	$	23,923	$	628,395

NOTE 5: Inventories

Inventories consisted of the following (in thousands):

July 4, 2021 December 31, 2020
Raw materials $ 22,229 $ 26,800
Work-in-process 3,996 4,780
Finished goods 42,278 29,250
$ 68,503 $ 60,830

The Company recorded provisions for excess and obsolete inventories of $1,111,000 and $1,816,000 for the three-month and six-month periods ended July 4, 2021, respectively, and $7,718,000 and $8,783,000 for the three-month and six-month periods ended June 28, 2020, respectively, which reduced the carrying value of the inventories to their net realizable value. Estimates in 2020 took into account the global economic conditions resulting from the COVID-19 pandemic.


	April 3, 2022		December 31, 2021
Raw materials	$	66,710	$	50,452
Work-in-process	3,979		5,293
Finished goods	65,971		57,357
	$	136,660	$	113,102

NOTE 6: Leases

The Company's leases are primarily leased properties across different worldwide locations where the Company conducts its operations. All of these leases are classified as operating leases. Certain leases may contain options to extend or terminate the lease at the Company's sole discretion. ~~There~~

As of April 3, 2022, there were no options to ~~extend or~~ terminate that were ~~included~~accounted for in the determination of the lease term for outstanding leases, and three options to extend that were accounted for in the ~~leases~~determination of the lease term of three of the Company's outstanding ~~as of July 4, 2021.~~leases. Certain leases contain leasehold improvement incentives, retirement obligations, escalating clauses, rent holidays, and variable payments tied to a consumer price index. There were no restrictions or covenants for outstanding leases as of ~~July 4, 2021.~~April 3, 2022.

The total operating lease expense for the three-month ~~and six-month~~ periods ended ~~July~~April 3, 2022 and April 4, 2021 ~~was $2,021,000~~were $2,229,000 and ~~$4,023,000,~~$2,002,000, respectively. The total operating lease cash payments for the three-month ~~and six-month~~ periods ended ~~July~~April 3, 2022 and April 4, 2021 were ~~$2,014,000~~$2,079,000 and ~~$4,075,000,~~$2,061,000, respectively. The total lease expense for leases with a term of twelve months or less for which the Company elected not to recognize a lease asset or lease liability for the three-month ~~and six-month~~ periods ended ~~July~~April 3, 2022 and April 4, 2021 ~~was~~were $38,000 and ~~$78,000,~~$40,000, respectively.

The total operating lease expense for the three-month and six-month periods ended June 28, 2020 was $2,147,000 and $4,053,000, respectively. The total operating lease cash payments for the three-month and six-month periods ended June 28, 2020 were $2,091,000 and $3,954,000, respectively. The total lease expense for leases with a term of twelve months or less for which the Company elected not to recognize a lease asset or lease liability for the three-month and six-month periods ended June 28, 2020 was $23,000 and $62,000, respectively.

1312

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Future operating lease cash payments are as follows (in thousands):


Year Ended December 31,	Year Ended December 31,	Amount		Year Ended December 31,	Amount
Remainder of fiscal 2021		$	4,598
2022		7,302
Remainder of fiscal 2022				Remainder of fiscal 2022	$	6,960
2023	2023	5,531		2023	7,978
2024	2024	2,500		2024	4,912
2025	2025	1,580		2025	3,197
2026	2026	1,018		2026	2,511
2027				2027	2,431
Thereafter	Thereafter	3,838		Thereafter	9,823
		$	26,367		$	37,812

The discounted present value of the future lease cash payments resulted in a lease liability of ~~$24,250,000~~$34,530,000 and ~~$26,230,000~~$25,581,000 as of ~~July 4, 2021~~April 3, 2022 and December 31, ~~2020,~~2021, respectively. The Company did not have any leases that had not yet commenced but that created significant rights and obligations as of ~~July 4, 2021 or December 31, 2020.~~April 3, 2022.

The weighted-average discount rate was ~~3.8%~~3.0% and ~~4.0%~~3.4% for the leases outstanding as of ~~July 4, 2021~~April 3, 2022 and December 31, ~~2020,~~2021, respectively. The weighted-average remaining lease term was ~~4.8~~6.6 and 5.1 years for the leases outstanding as of ~~July 4, 2021~~April 3, 2022 and December 31, ~~2020,~~2021, respectively.

Management closed eleven leased offices in 2020, prior to the end of their lease terms, as a part of the Company's restructuring plan (refer to Note 16). The carrying value of the lease assets associated with the majority of these offices was reduced to 0 as of June 28, 2020, resulting in operating lease asset impairment charges of $2,534,000 for the three-month period ended June 28, 2020 that are included in "Restructuring charges" on the Consolidated Statements of Operations. Management is currently negotiating early contract terminations for the remaining lease liability obligations associated with these abandoned offices, which obligations totaled $2,264,000 and $2,877,000 as of July 4, 2021 and December 31, 2020, respectively, and are included in "Operating lease liabilities" on the Consolidated Balance Sheets.

NOTE 7: Goodwill

The changes in the carrying value of goodwill were as follows (in thousands):


Balance as of December 31, ~~2020~~2021	$	~~244,078~~241,713
Foreign exchange rate changes	~~(1,172)~~(533)
Balance as of ~~July 4, 2021~~April 3, 2022	$	~~242,906~~241,180

The adverse impact of the COVID-19 pandemic on our business in 2020 triggered a review of long-lived assets, including goodwill, for potential impairment during the second quarter of 2020. Based on this assessment, management concluded that events and circumstances did not indicate the fair value of the reporting unit was less than its carrying value. Factors that management considered in this qualitative assessment included macroeconomic conditions, industry and market considerations, overall financial performance (both current and projected), changes in management or strategy, changes in the composition or carrying amount of net assets, and market capitalization.

~~COGNEX CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

NOTE 8: Intangible Assets

Amortized intangible assets consisted of the following (in thousands):

Gross
Carrying
Value Accumulated
Amortization Net
Carrying
Value
Distribution networks $ 38,060 $ 38,060 $ 0
Completed technologies 24,217 13,835 10,382
Customer relationships 10,578 7,520 3,058
Non-compete agreements 710 464 246
Trademarks 110 94 16
Balance as of July 4, 2021 $ 73,675 $ 59,973 $ 13,702
Gross
Carrying
Value Accumulated
Amortization Net
Carrying
Value
Distribution networks $ 38,060 $ 38,060 $ 0
Completed technologies 24,217 12,397 11,820
Customer relationships 10,578 7,160 3,418
Non-compete agreements 710 436 274
Trademarks 110 67 43
Balance as of December 31, 2020 $ 73,675 $ 58,120 $ 15,555

~~As of July 4, 2021, estimated future amortization expense related to intangible assets was as follows (in thousands):~~

Year Ended December 31, Amount
Remainder of fiscal 2021 $ 1,803
2022 3,286
2023 2,594
2024 2,080
2025 1,757
2026 1,452
Thereafter 730
$ 13,702

The adverse impact of the COVID-19 pandemic on our business in 2020 triggered a review of long-lived assets, including intangible assets, for potential impairment during the second quarter of 2020. Based on this assessment, management concluded that certain of the Company's finite-lived intangible assets failed the recoverability test, and recorded impairment charges for these assets equal to the amount by which their carrying value exceeded their fair value. The Company also measured the fair value and recorded an impairment charge for its indefinite-lived intangible asset related to in-process technologies. The fair values were established, with the assistance of an outside valuation advisor, using the income approach based on a discounted cash flow model that estimated future revenue streams and expenses attributable to those revenue streams provided by management.


	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Distribution networks	$	38,060	$	38,060	$	—
Completed technologies	24,217		15,892		8,325
Customer relationships	10,578		8,060		2,518
Non-compete agreements	710		505		205
Trademarks	110		110		—
Balance as of April 3, 2022	$	73,675	$	62,627	$	11,048

	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Distribution networks	$	38,060	$	38,060	$	—
Completed technologies	24,217		15,234		8,983
Customer relationships	10,578		7,891		2,687
Non-compete agreements	710		492		218
Trademarks	110		110		—
Balance as of December 31, 2021	$	73,675	$	61,787	$	11,888

1513

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~This review resulted in intangible asset impairment charges totaling $19,571,000 in the second quarter~~As of 2020, primarily related to lower projected cash flows from the technologies and customer relationships acquired from Sualab Co. Ltd. ("Sualab") as a result of the deteriorating global economic conditions from the COVID-19 pandemic. Completed technologies, in-process technologies, and customer relationships acquired from Sualab were impaired in the amounts of $10,070,000, $5,900,000, and $3,382,000, respectively. In addition, customer relationships acquired from EnShape GmbH that had a gross carrying value of $447,000 and accumulatedApril 3, 2022, estimated future amortization ~~of $228,000 on the measurement date were reduced to 0, resulting in an impairment charge of $219,000. The Company did not record impairment charges~~expense related to intangible assets ~~during the three-month or six-month periods ended July 4, 2021.~~was as follows (in thousands):


Year Ended December 31,	Amount
Remainder of fiscal 2022	$	2,435
2023	2,594
2024	2,080
2025	1,757
2026	1,452
2027	730
	$	11,048

NOTE 9: Warranty Obligations

The Company records the estimated cost of fulfilling product warranties at the time of sale based upon historical costs to fulfill claims. Obligations may also be recorded subsequent to the time of sale whenever specific events or changes in circumstances impacting product quality become known that would not have been taken into account using historical data. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers and third-party contract manufacturers, the Company’s warranty obligation is affected by product failure rates, material usage, and service delivery costs incurred in correcting a product failure. An adverse change in any of these factors may result in the need for additional warranty provisions. Warranty obligations are included in “Accrued expenses” on the Consolidated Balance Sheets.

The changes in the warranty obligation were as follows (in thousands):


Balance as of December 31, ~~2020~~2021	$	~~5,406~~5,427
Provisions for warranties issued during the period	~~1,693~~876
Fulfillment of warranty obligations	~~(1,235)~~(779)

Balance as of ~~July 4, 2021~~April 3, 2022	$	~~5,864~~5,524

NOTE 10: Commitments and Contingencies

As of April 3, 2022, the Company had outstanding purchase orders totaling $88,981,000 to procure inventory from various vendors, due in part to higher inventory purchases in response to global supply chain constraints. Certain of these purchase orders may be canceled by the Company, subject to cancellation penalties. These purchase commitments relate primarily to expected sales in the next twelve months.

A significant portion of the Company's outstanding inventory purchase orders as of April 3, 2022, as well as additional preauthorized commitments to procure strategic components based on the Company's expected customer demand, are placed with the Company's primary contract manufacturer for the Company's assembled products. The Company has the obligation to purchase any non-cancelable and non-returnable components that have been purchased by this contract manufacturer with the Company's preauthorization, when these components have not been consumed within the period defined in the terms of the Company's agreement with this contract manufacturer.

NOTE ~~10:~~11: Derivative Instruments

The Company’s foreign currency risk management strategy is principally designed to mitigate the potential financial impact of changes in the value of transactions and balances denominated in foreign currencies resulting from changes in foreign currency exchange rates. The Company enters into economic hedges utilizing foreign currency forward contracts with maturities ~~of up to 95 days~~that do not exceed approximately three months to manage the exposure to fluctuations in foreign currency exchange rates arising primarily from foreign-denominated receivables and payables. The gains and losses on these derivatives are intended to be offset by the changes in the fair value of the assets and liabilities being hedged. These economic hedges are not designated as hedging instruments for hedge accounting treatment.

1614

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company had the following outstanding forward contracts (in thousands):


		July 4, 2021			December 31, 2020				April 3, 2022			December 31, 2021
Currency	Currency	Notional Value	USD Equivalent		Notional Value	USD Equivalent		Currency	Notional Value	USD Equivalent		Notional Value	USD Equivalent
Derivatives Not Designated as Hedging Instruments:	Derivatives Not Designated as Hedging Instruments:							Derivatives Not Designated as Hedging Instruments:
Euro								Euro	70,000	$	77,366	65,000	$	73,748
Chinese Renminbi	Chinese Renminbi	490,000	$	75,228	0	$	0	Chinese Renminbi	253,000	39,619		54,374	8,500
Euro		35,000	41,457		50,000	61,342
Korean Won		21,000,000	18,483		6,925,000	6,377
Mexican Peso	Mexican Peso	130,000	6,519		155,000	7,776		Mexican Peso	230,000	11,558		140,000	6,842

Japanese Yen	Japanese Yen	600,000	5,391		600,000	5,808		Japanese Yen	650,000	5,295		600,000	5,213
British Pound								British Pound	2,975	3,895		3,370	4,552
Hungarian Forint	Hungarian Forint	1,235,000	4,149		1,330,000	4,494		Hungarian Forint	1,235,000	3,693		1,355,000	4,155
British Pound		2,820	3,881		1,675	2,287
Taiwanese Dollar		42,150	1,511		38,035	1,362

Canadian Dollar	Canadian Dollar	1,435	1,160		1,285	1,010		Canadian Dollar	1,675	1,339		1,480	1,167
Singapore Dollar		1,550	1,149		1,465	1,110

Information regarding the fair value of the outstanding forward contracts was as follows (in thousands):

Asset Derivatives

Liability Derivatives

Asset Derivatives

Liability Derivatives

Balance

Fair Value

Balance

Fair Value

Balance

Fair Value

Balance

Fair Value

Sheet
Location

July 4, 2021

December 31, 2020

Sheet
Location

July 4, 2021

December 31, 2020

Sheet
Location

April 3, 2022

December 31, 2021

Sheet
Location

April 3, 2022

December 31, 2021

Derivatives Not Designated as Hedging Instruments:

Economic hedge forward contracts

Prepaid expenses and other current assets

265

Accrued expenses

585

Economic hedge forward contracts

Prepaid expenses and other current assets

Accrued expenses

441

230

The following table presents the gross activity for all derivative assets and liabilities which were presented on a net basis on the Consolidated Balance Sheets due to the right of offset with each counterparty (in thousands):


Asset Derivatives	Asset Derivatives					Liability Derivatives					Asset Derivatives					Liability Derivatives
		July 4, 2021		December 31, 2020			July 4, 2021		December 31, 2020			April 3, 2022		December 31, 2021			April 3, 2022		December 31, 2021
Gross amounts of recognized assets	Gross amounts of recognized assets	$	47	$	265	Gross amounts of recognized liabilities	$	585	$	38	Gross amounts of recognized assets	$	42	$	39	Gross amounts of recognized liabilities	$	441	$	230
Gross amounts offset	Gross amounts offset	0		0		Gross amounts offset	0		0		Gross amounts offset	—		—		Gross amounts offset	—		—
Net amount of assets presented	Net amount of assets presented	$	47	$	265	Net amount of liabilities presented	$	585	$	38	Net amount of assets presented	$	42	$	39	Net amount of liabilities presented	$	441	$	230

Information regarding the effect of derivative instruments on the consolidated financial statements was as follows (in thousands):

Location in Financial Statements Three-months Ended Six-months Ended
July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020
Derivatives Not Designated as Hedging Instruments:
Gains (losses) recognized in current operations Foreign currency gain (loss) $ (746) $ 60 $ 2,148 $ (8,180)

Location in Financial Statements

Three-months Ended

April 3, 2022

April 4, 2021

Derivatives Not Designated as Hedging Instruments:

Gains (losses) recognized in current operations

Foreign currency gain (loss)

1,739

2,893

1715

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE ~~11:~~12: Revenue Recognition

The following table summarizes disaggregated revenue information by geographic area based upon the customer's country of domicile (in thousands):


		Three-months Ended				Six-months Ended					Three-months Ended
		July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020			April 3, 2022		April 4, 2021
Americas	Americas	$	108,418	$	68,966	$	216,254	$	129,214	Americas	$	126,658	$	107,836
Europe	Europe	59,967		35,987		117,015		84,569		Europe	62,792		57,048
Greater China	Greater China	59,706		31,898		97,944		58,301		Greater China	48,406		38,238
Other Asia	Other Asia	41,067		32,246		76,972		64,248		Other Asia	44,551		35,905
		$	269,158	$	169,097	$	508,185	$	336,332		$	282,407	$	239,027

The following table summarizes disaggregated revenue information by revenue type (in thousands):

Three-months Ended Six-months Ended
July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020
Standard products and services $ 234,322 $ 158,807 $ 456,648 $ 311,662
Application-specific customer solutions 34,836 10,290 51,537 24,670
$ 269,158 $ 169,097 $ 508,185 $ 336,332


	Three-months Ended
	April 3, 2022		April 4, 2021
Standard products and services	$	257,880	$	222,326
Application-specific customer solutions	24,527		16,701
	$	282,407	$	239,027

Costs to Fulfill a Contract

Costs to fulfill a contract are included in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to ~~$25,328,000~~$11,429,000 and ~~$6,846,000~~$10,854,000 as of ~~July 4, 2021~~April 3, 2022 and December 31, ~~2020,~~2021, respectively.

Accounts Receivable, Contract Assets, and Contract Liabilities

Accounts receivable represent amounts billed and currently due from customers which are reported at their net estimated realizable value. The Company maintains an allowance against its accounts receivable for credit losses. Contract assets consist of unbilled revenue which arises when revenue is recognized in advance of billing for certain application-specific customer solutions contracts. Contract liabilities consist of deferred revenue and customer deposits which arise when amounts are billed to or collected from customers in advance of revenue recognition.

The following table summarizes the allowance for credit losses activity for the ~~six-month~~three-month period ended ~~July 4, 2021~~April 3, 2022 (in thousands):


Balance as of December 31, ~~2020~~2021	$	~~831~~776
~~Increases to the allowance for credit losses~~	0
Write-offs, net of recoveries	~~(28)~~(10)
~~Foreign exchange rate changes~~	0
Balance as of ~~July 4, 2021~~April 3, 2022	$	~~803~~766

1816

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table summarizes the deferred revenue and customer deposits activity for the ~~six-month~~three-month period ended ~~July 4, 2021~~April 3, 2022 (in thousands):


Balance as of December 31, ~~2020~~2021	$	~~21,274~~35,743
Deferral of revenue billed in the current period, net of recognition	~~69,372~~41,913
Recognition of revenue deferred in prior period	~~(14,155)~~(23,202)
Foreign exchange rate changes	~~(46)~~1
Balance as of ~~July 4, 2021~~April 3, 2022	$	~~76,445~~54,455

As a practical expedient, the Company has elected not to disclose the aggregate amount of the transaction price allocated to unsatisfied performance obligations, as our contracts have an original expected duration of less than one year.

NOTE ~~12:~~13: Stock-Based Compensation Expense

Stock Plans

The Company’s stock-based awards that result in compensation expense consist of stock options, ~~and~~ restricted stock units ("RSUs"), and performance restricted stock units ("PRSUs"). As of ~~July 4, 2021,~~April 3, 2022, the Company had ~~15,692,000~~14,242,000 shares available for grant under its stock plans. Stock options are granted with an exercise price equal to the market value of the Company’s common stock at the grant date and generally vest over four or five years based upon continuous service and expire ten years from the grant date. RSUs generally vest upon three years or four years of continuous employment or incrementally over such ~~three-year~~three or four-year period. PRSUs generally vest upon three years of continuous employment and achievement of performance criteria established by the Compensation Committee of our Board of Directors on or prior to the grant date. Participants are not entitled to dividends on ~~RSUs.~~RSUs or PRSUs.

Stock Options

The following table summarizes the Company’s stock option activity for the ~~six-month~~three-month period ended ~~July 4, 2021:~~April 3, 2022:

Shares
(in thousands) Weighted-
Average
Exercise
Price Weighted-
Average
Remaining
Contractual
Term (in years) Aggregate
Intrinsic
Value
(in thousands)
Outstanding as of December 31, 2020 8,970 $ 44.73
Granted 469 89.19
Exercised (1,167) 38.51
Forfeited or expired (171) 50.95
Outstanding as of July 4, 2021 8,101 $ 48.07 6.91 $ 298,370
Exercisable as of July 4, 2021 3,652 $ 38.46 5.72 $ 168,497
Options vested or expected to vest as of July 4, 2021 (1) 7,474 $ 47.27 6.81 $ 281,063


	Shares (in thousands)	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2021	7,610	$	49.38
Granted	1,003	64.43
Exercised	(98)	47.19
Forfeited or expired	(86)	62.79
Outstanding as of April 3, 2022	8,429	$	51.06	6.73	$	233,406
Exercisable as of April 3, 2022	4,332	$	43.39	5.56	$	151,220
Options vested or expected to vest as of April 3, 2022 (1)	7,901	$	50.34	6.62	$	224,117

(1) In addition to the vested options, the Company expects a portion of the unvested options to vest at some point in the future. Options expected to vest are calculated by applying an estimated forfeiture rate to the unvested options.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The fair values of stock options granted in each period presented were estimated using the following weighted-average assumptions:

Three-months Ended Six-months Ended
July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020
Risk-free rate 1.5 % 1.6 % 1.3 % 1.6 %
Expected dividend yield 0.31 % 0.43 % 0.27 % 0.43 %
Expected volatility 39 % 37 % 39 % 37 %
Expected term (in years) 7.1 6.0 5.8 6.0

~~COGNEX CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~


	Three-months Ended
	April 3, 2022		April 4, 2021
Risk-free rate	1.9	%	1.3	%
Expected dividend yield	0.40	%	0.27	%
Expected volatility	37	%	39	%
Expected term (in years)	5.2		5.7

Risk-free rate

The risk-free rate was based upon a treasury instrument whose term was consistent with the contractual term of the option.

Expected dividend yield

Generally, the current dividend yield is calculated by annualizing the cash dividend declared by the Company’s Board of Directors and dividing that result by the closing stock price on the grant date.

Expected volatility

The expected volatility was based upon a combination of historical volatility of the Company’s common stock over the contractual term of the option and implied volatility for traded options of the Company’s stock.

Expected term

The expected term was derived from the binomial lattice model from the impact of events that trigger exercises over time.

The weighted-average grant-date fair values of stock options granted during the three-month ~~and six-month~~ periods ended ~~July~~April 3, 2022 and April 4, 2021 were ~~$32.07~~$22.45 and ~~$33.47, respectively, and during the three-month and six-month periods ended June 28, 2020 were $19.13 and $18.52,~~$33.63, respectively.

The total intrinsic values of stock options exercised for the three-month ~~and six-month~~ periods ended ~~July~~April 3, 2022 and April 4, 2021 were ~~$11,621,000~~$2,165,000 and ~~$53,948,000, respectively, and for the three-month and six-month periods ended June 28, 2020 were $39,359,000 and $53,814,000,~~$42,327,000, respectively. The total fair values of stock options vested for the three-month ~~and six-month~~ periods ended ~~July~~April 3, 2022 and April 4, 2021 were ~~$1,830,000~~$25,535,000 and ~~$37,430,000, respectively, and for the three-month and six-month periods ended June 28, 2020 were $1,287,000 and $37,951,000,~~$35,600,000, respectively.

Restricted Stock Units (RSUs)

The following table summarizes the Company's RSUs activity for the ~~six-month~~three-month period ended ~~July 4, 2021:~~April 3, 2022:


		Shares (in thousands)	Weighted-Average Grant Date Fair Value			Shares (in thousands)	Weighted-Average Grant Date Fair Value
Nonvested as of December 31, 2020		554	$	51.27
Nonvested as of December 31, 2021					Nonvested as of December 31, 2021	823	$	65.26
Granted	Granted	296	87.46		Granted	466	63.96
Vested	Vested	(15)	56.61		Vested	(54)	87.29
Forfeited or expired	Forfeited or expired	(27)	54.60		Forfeited or expired	(18)	66.10
Nonvested as of July 4, 2021		808	$	64.31
Nonvested as of April 3, 2022					Nonvested as of April 3, 2022	1,217	$	63.78

The fair value of RSUs is determined based on the observable market price of the Company's stock on the grant date less the present value of expected future dividends. The weighted-average grant-date fair values of RSUs granted during the three-month ~~and six-month~~ periods ended ~~July~~April 3, 2022 and April 4, 2021 were ~~$75.98~~$63.96 and ~~$87.46, respectively, and during the three-month and six-month periods ended June 28, 2020 were $56.97 and $51.53,~~$89.86, respectively. ~~There were 13,000 and 15,000~~The number of RSUs that vested during the three-month ~~and six-month~~ periods ended ~~July~~April 3, 2022 and April 4, 2021 ~~respectively. There~~ were ~~0 RSUs that~~54,000 and 2,000, respectively.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Performance Restricted Stock Units (PRSUs)

The following table summarizes the Company's PRSUs activity for the three-month period ended April 3, 2022:


	Shares (in thousands)	Weighted-Average Grant Date Fair Value
Nonvested as of December 31, 2021	—	$	—
Granted	33	62.49
Vested	—	—
Forfeited or expired	—	—
Nonvested as of April 3, 2022	33	$	62.49

NaN PRSUs were granted or vested during the three-month period ended April 4, 2021.

The fair value of PRSUs is calculated using the Monte Carlo simulation model to estimate the probability of satisfying the service and ~~six-month periods ended June 28, 2020.~~market conditions stipulated in the award grant.

Stock-Based Compensation Expense

The Company ~~segments~~stratifies its employee population into 2 groups: one consisting of senior management and another consisting of all other employees. The Company currently applies an estimated annual forfeiture rate of 8%7% to all stock-based awards for senior management and a rate of 12% for all other employees. Each year during the first quarter, the Company revises its forfeiture rate based on updated estimates of employee turnover. This resulted in an increase to compensation expense of $1,536,000 in 2022 and a decrease to compensation expense of $255,000 in ~~2021 and an increase to compensation expense of $1,787,000 in 2020.~~

~~COGNEX CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

2021.

As of ~~July 4, 2021,~~April 3, 2022, total unrecognized compensation expense related to non-vested equity awards, including stock options, RSUs and ~~RSUs,~~PRSUs, was ~~$63,625,000,~~$81,239,000, which is expected to be recognized over a weighted-average period of 1.8 years.

The total stock-based compensation expense and the related income tax benefit recognized for the three-month period ended ~~July 4, 2021~~April 3, 2022 were ~~$10,730,000~~$15,056,000 and ~~$1,651,000, respectively, and for the six-month period ended July 4, 2021 were $22,739,000 and $3,464,000,~~$2,319,000, respectively. The total stock-based compensation expense and the related income tax benefit recognized for the three-month period ended ~~June 28, 2020~~April 4, 2021 were ~~$8,018,000~~$12,009,000 and ~~$1,277,000, respectively, and for the six-month period ended June 28, 2020 were $22,808,000 and $3,841,000,~~$1,813,000, respectively. Stock-based compensation expense recognized for the three-month and six-month periods ended June 28, 2020 included credits of $1,401,000 relating to grants cancelled as a result of the Company's workforce reduction in the second quarter of 2020. NaNNo compensation expense was capitalized as of ~~July 4, 2021~~April 3, 2022 or December 31, ~~2020.~~2021.

The following table presents the stock-based compensation expense by caption for each period presented on the Consolidated Statements of Operations (in thousands):


		Three-months Ended				Six-months Ended					Three-months Ended
		July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020			April 3, 2022		April 4, 2021
Cost of revenue	Cost of revenue	$	351	$	363	$	599	$	717	Cost of revenue	$	563	$	248
Research, development, and engineering	Research, development, and engineering	3,064		2,401		7,067		7,767		Research, development, and engineering	4,448		4,003
Selling, general, and administrative	Selling, general, and administrative	7,315		5,254		15,073		14,324		Selling, general, and administrative	10,045		7,758
		$	10,730	$	8,018	$	22,739	$	22,808		$	15,056	$	12,009

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE ~~13:~~14: Stock Repurchase Program

~~In October 2018,~~On March 12, 2020, the Company's Board of Directors authorized the repurchase of $200,000,000 of the Company's common stock. As of ~~July 4, 2021,~~April 3, 2022, the Company repurchased ~~3,075,000~~2,737,000 shares at a cost of ~~$142,225,000~~$200,000,000 under this program, including ~~258,000~~1,677,000 shares at a cost of ~~$20,877,000~~$117,000,000 during the ~~six-month~~three-month period ended ~~July 4, 2021, leaving a remaining balance of $57,775,000. 1,215,000 shares at a cost of $51,036,000 were repurchased during the six-month period ended June 28, 2020~~April 3, 2022, which completed purchases under this ~~October 2018~~ program. On March ~~12, 2020,~~3, 2022, the Company's Board of Directors authorized the repurchase of an additional ~~$200,000,000~~$500,000,000 of the Company's common stock. ~~Purchases~~During the three-month period ended April 3, 2022, the Company repurchased 202,000 shares at a cost of $13,405,000 under this ~~March 2020~~ program, ~~will commence upon completion~~leaving a remaining balance of ~~the October 2018 program.~~$486,595,000 as of April 3, 2022. The Company may repurchase shares under this program in future periods depending on a variety of factors, including, among other things, the impact of dilution from employee stock awards, stock price, share availability, and cash requirements. The Company is authorized to make repurchases of its common stock through open market purchases, pursuant to Rule 10b5-1 trading plans, or in privately negotiated transactions.

~~COGNEX CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

NOTE ~~14:~~15: Income Taxes

~~A reconciliation of the United States federal statutory corporate tax rate to the Company’s income tax expense, or~~The Company's effective tax rate was ~~as follows:~~23% for the three-month period ended April 3, 2022 and 11% for the three-month period ended April 4, 2021.

Three-months Ended Six-months Ended
July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020
Income tax expense (benefit) at U.S. federal statutory corporate tax rate 21 % (21) % 21 % 21 %
State income taxes, net of federal benefit 2 % (1) % 2 % 1 %
Foreign tax rate differential (5) % 5 % (5) % (5) %
Tax credit (1) % 2 % (1) % (2) %
Discrete tax benefit related to stock options (2) % (191) % (4) % (29) %
Discrete tax expense related to tax return filings 1 % 141 % 0 % 17 %
Tax rate adjustment 0 % 18 % 0 % 0 %
Other 1 % (4) % 1 % 4 %
Income tax expense (benefit) 17 % (51) % 14 % 7 %

~~The Company recorded discrete~~Discrete tax ~~benefits~~items for the three-month period ended April 4, 2021 included a decrease in tax expense of $5,207,000 related to stock-based compensation, primarily from the excess tax benefit arising from the difference between the deduction for tax purposes and the compensation cost recognized for financial reporting purposes from stock option ~~exercises that resulted in a favorable~~exercises. This impact to the effective tax rate of 2% and 4% for the three-month and six-month periods ended July 4, 2021, respectively, and 191% and 29% for the three-month and six-month periods ended June 28, 2020, respectively. In addition to stock option exercises, other discrete adjustments recorded included the final true-up of the prior year's tax accrual upon filing the related tax return that resulted in an unfavorable impact to the effective tax rate of 1%was not material for the three-month period ended ~~July 4, 2021 and 0 impact~~April 3, 2022.

Discrete tax items for the ~~six-month~~three-month period ended ~~July 4, 2021,~~April 3, 2022 included (1) an increase in tax expense of $1,417,000 arising from an Internal Revenue Service (IRS) audit, (2) an increase in tax expense of $1,734,000 to establish a full valuation allowance against deferred tax assets related to foreign tax credits, and (3) an ~~unfavorable impact to the effective~~increase in tax ~~rate~~expense of ~~141%~~$3,187,000 consisting primarily of transfer pricing and ~~17% for the same periods in 2020.~~return-to-provision adjustments.

Excluding the impact of these discrete tax items, the Company’s effective tax rate was ~~an expense of 18% of pre-tax income~~16% for ~~both~~ the three-month period ended April 3, 2022 and ~~six-month periods~~18% for the three-month period ended ~~July~~April 4, ~~2021,~~2021. The Company has defined its major tax jurisdictions as the United States, Ireland, China, and Korea, and within the United States, Massachusetts. The statutory tax rate is 12.5% in Ireland, 25% in China, and 22% in Korea compared to the U.S. federal statutory corporate tax rate of 21%. These differences resulted in a ~~benefit of 1% of pre-tax loss and an expense of 19% of pre-tax income~~lower effective tax rate for the three-month period ended April 3, 2022 as compared to the same ~~periods~~period in ~~2020.~~2021 due to more of the Company's profits being earned and taxed in lower tax jurisdictions. The remaining decrease in the effective tax rate for the six-month period, excluding the impact of discrete items, was due to a lower percentage of the Company's pre-tax income being earned and taxed in higher tax jurisdictions. There was an adjustment in the three-month period ~~in 2020~~was primarily attributable to ~~bring the year-to-date effective~~higher estimated R&D tax ~~rate to 19%.~~

During the six-month period ended July 4, 2021, the Company recorded a $935,000 increase in reserves for income taxes, net of deferred tax benefit. Estimated interest and penalties included in these amounts totaled $370,000 for the six-month period ended July 4, 2021.credit utilization.

The Company’s reserve for income taxes, including gross interest and penalties, was ~~$16,255,000~~$15,678,000 as of ~~July 4, 2021,~~April 3, 2022, which included ~~$15,227,000~~$15,110,000 classified as a non-current liability and ~~$1,028,000~~$568,000 recorded as a reduction to non-current deferred tax assets. If the Company’s tax positions were sustained or the statutes of limitations related to certain positions expired, these reserves would be released and income tax expense would be reduced in a future period. As a result of the expiration of certain statutes of limitations, there is a potential that a portion of these reserves could be released, which would decrease income tax expense by approximately $450,000 to $500,000 over the next twelve months.

The Company has defined its major tax jurisdictions as the United States, Ireland, China, and Korea, and within the United States, Massachusetts. The statutory tax rate is 12.5% in Ireland, 25% in China, and 25% in Korea compared to the U.S. federal statutory corporate tax rate of 21%. These differences resulted in an impact to the effective tax rate of 5% for both the three-month and six-month periods ended July 4, 2021, and an impact of 5% for the same periods in 2020.

~~COGNEX CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

Within the United States, the tax years 2017 through 2020 remain open to examination by the ~~Internal Revenue Service ("IRS")~~IRS and various state tax authorities. The tax years 2016 through ~~2020~~2021 remain open to examination by various taxing authorities in other jurisdictions in which the Company operates. The Company is under audit by the IRS for the tax years 2017 and 2018. ~~Additionally,~~Management expects to release reserves associated with the periods under audit in the second or third quarter of 2022 when the Company receives the Closing Letter for Agreed Income Tax Cases from the IRS, resulting in a decrease in tax expense of approximately $2,400,000. The Company is no longer under audit by the Commonwealth of Massachusetts for tax years 2017 and 2018. ~~Management believes~~The audit was completed during the ~~Company is adequately reserved for these audits. The final determination of~~three-month period ended April 3, 2022 and resulted in no material tax ~~audits could result in favorable or unfavorable changes in our estimates.~~impact to the Company's financial statements.

COGNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE ~~15:~~16: Weighted-Average Shares

Weighted-average shares were calculated as follows (in thousands):


		Three-months Ended		Six-months Ended			Three-months Ended
		July 4, 2021	June 28, 2020	July 4, 2021	June 28, 2020		April 3, 2022	April 4, 2021
Basic weighted-average common shares outstanding	Basic weighted-average common shares outstanding	176,626	172,283	176,454	172,345	Basic weighted-average common shares outstanding	174,146	176,288
Effect of dilutive equity awards	Effect of dilutive equity awards	3,365	0	3,528	3,154	Effect of dilutive equity awards	2,522	3,683
Weighted-average common and common-equivalent shares outstanding	Weighted-average common and common-equivalent shares outstanding	179,991	172,283	179,982	175,499	Weighted-average common and common-equivalent shares outstanding	176,668	179,971

Stock options to purchase ~~701,000~~1,282,000 and ~~591,000~~485,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month ~~and six-month~~ periods ended ~~July~~April 3, 2022 and April 4, 2021, respectively, ~~and 5,801,000 and 6,328,000 for the same periods in 2020,~~ but were not included in the calculation of dilutive net income per share because they were anti-dilutive. Restricted stock units totaling ~~500~~20,000 and ~~1,000~~124,000 shares of common stock, on a weighted-average basis, were outstanding during the three-month ~~and six-month~~ periods ended ~~July~~April 3, 2022 and April 4, 2021, respectively, ~~and 27,000 and 14,000 for the same periods in 2020,~~ but were not included in the calculation of dilutive net income per share because they were anti-dilutive. ~~Additionally, because the Company recorded~~There were 0 anti-dilutive performance restricted stock units outstanding, on a ~~cumulative net loss~~weighted-average basis, during the three-month ~~period ended June 28, 2020, potential common stock equivalents of 3,120,000 were not included in the calculation of diluted net loss per share for this period.~~

~~NOTE 16: Restructuring Charges~~

On May 26, 2020, the Company's Board of Directors approved a restructuring plan intended to reduce the Company's operating costs, optimize its business model, and address the impact of the COVID-19 pandemic. The restructuring plan included a global workforce reduction of approximately 8% and office closures.

As of December 31, 2020, the majority of these actions were completed and no additional charges are expected to be incurred in future periods in relation to this restructuring plan. There were 0 restructuring charges recognized during the three-month or six-month periods ended ~~July~~April 3, 2022 or April 4, 2021.

~~The following table summarizes the restructuring charges incurred in the three-month period ended June 28, 2020 (in thousands):~~

~~Incurred in the Three-months Ended June 28, 2020~~

~~One-time termination benefits~~

~~10,386~~

~~Contract termination costs~~

~~3,995~~

~~Other associated costs~~

~~417~~

~~14,798~~

One-time termination benefits included severance, health insurance, and outplacement services for 181 employees who were either terminated during the second quarter of 2020, or were notified during the second quarter of 2020 that they would be terminated at a future date. For employees not required to render service beyond a minimum retention period, the one-time termination benefits were recognized in the three-month period ended June 28, 2020. Otherwise, these benefits, including retention bonuses for selected employees, were recognized over the service period, which was completed by December 31, 2020.

~~COGNEX CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

Contract termination costs included operating lease asset impairment charges for offices closed prior to the end of the contractual lease term. These costs also included the write-off of leasehold improvements and other equipment related to these abandoned offices that had no alternative use, as well as other associated operating costs, such as utilities, that the Company is obligated to pay for the remainder of the lease term. These contract termination costs were primarily recognized in the second quarter of 2020 when the Company ceased using the property for economic benefit.

~~Other associated costs primarily included legal fees related to the employee termination actions, which were recognized when the services were performed.~~

The following table summarizes the activity for the six-month period ended July 4, 2021 in the Company’s restructuring reserve which is included in “Accrued expenses” on the Consolidated Balance Sheets (in thousands):

One-time Termination Benefits Contract Termination Costs Other Associated Costs Total
Balance as of December 31, 2020 $ 1,624 $ 750 $ 15 $ 2,389
Cash payments (1,117) (131) (15) (1,263)
Foreign exchange rate changes 0 (3) 0 (3)
Balance as of July 4, 2021 $ 507 $ 616 $ 0 $ 1,123

NOTE 17: Subsequent Events

On ~~August~~May 5, ~~2021,~~2022, the Company’s Board of Directors declared a cash dividend of ~~$0.060~~$0.065 per share. The dividend is payable on ~~September~~June 3, ~~2021~~2022 to all shareholders of record as of the close of business on ~~August~~May 20, ~~2021.~~2022.

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Certain statements made in this report, as well as oral statements made by the Company from time to time, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Readers can identify these forward-looking statements by our use of the words “expects,” “anticipates,” “estimates,” “believes,” “projects,” “intends,” “plans,” “will,” “may,” “shall,” “could,” “should,” and similar words and other statements of a similar sense. These statements are based on our current estimates and expectations as to prospective events and circumstances, which may or may not be in our control and as to which there can be no firm assurances given. These forward-looking statements, which include statements regarding business and market trends, future financial performance and financial targets, the expected impact of the COVID-19 pandemic on our assets, business and results of operations, customer demand and order rates and timing of related revenue, managing supply shortages, delivery lead times, future product mix, ~~restructuring and other cost-savings initiatives,~~ research and development activities, sales and marketing activities, new product offerings and product development activities, capital expenditures, investments, liquidity, dividends and stock repurchases, strategic and growth plans, and estimated tax benefits and expenses and other tax matters, involve known and unknown risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include: (1) the reliance on key suppliers to manufacture and deliver quality products; (2) the inability to obtain components for our products; (3) the failure to effectively manage product transitions or accurately forecast customer demand; (4) the inability to manage disruptions to our distribution centers; (5) the inability to design and manufacture high-quality products; (6) the impact, duration, and severity of the COVID-19 ~~pandemic; (2) potential disruptions to our business due to restructuring activities; (3)~~pandemic, including the availability and effectiveness of vaccines; (7) the loss of, or curtailment of purchases by, large customers in the ~~consumer electronics and~~ logistics ~~industries; (4) the reliance on revenue from the automotive~~ industry; (5) the reliance on key suppliers to manufacture and deliver critical components for our products and potential disruptions to the supply chain, which could impact timely delivery of customer orders; (6) the failure to effectively manage product transitions or accurately forecast customer demand; (7)(8) information security breaches; (9) the inability to ~~design~~protect our proprietary technology and ~~manufacture high-quality products; (8)~~intellectual property; (10) the inability to attract and retain skilled employees and maintain our unique corporate culture; ~~(9) the failure to effectively manage our growth; (10) the inability to achieve growth in revenue and profits from the logistics industry;~~ (11) the technological obsolescence of current products and the inability to develop new products; (12) the failure to properly manage the distribution of products and services; (13) the impact of competitive pressures; (14) the challenges in integrating and achieving expected results from acquired businesses; (15) potential disruptions in our business systems; (16) ~~information security breaches; (17) the inability to protect our proprietary technology and intellectual property; (18)~~ potential impairment charges with respect to our investments or acquired intangible

assets; ~~(19)~~(17) exposure to additional tax liabilities; ~~(20)~~(18) fluctuations in foreign currency exchange rates and the use of derivative instruments; ~~(21) our involvement in time-consuming and costly litigation; (22)~~(19) unfavorable global economic ~~conditions; and (23)~~conditions, including high inflation rates; (20) business disruptions from natural or man-made disasters or public health issues; (21) economic, political, and other risks associated with international sales and ~~operations.~~operations, including the impact of the war in Ukraine; and (22) our involvement in time-consuming and costly litigation. The foregoing list should not be construed as exhaustive and we encourage readers to refer to the detailed discussion of risk factors included in Part I - Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020,~~2021, as updated by Part II - Item 1A of this Quarterly Report on Form 10-Q. The Company cautions readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. The Company disclaims any obligation to subsequently revise forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date such statements are made.

Executive Overview

Cognex Corporation is a leading worldwide provider of machine vision products that capture and analyze visual information in order to automate manufacturing and distribution tasks where vision is required. In addition to product revenue derived from the sale of machine vision products, the Company also generates revenue by providing maintenance and support, consulting, and training services to its customers; however, service revenue accounted for less than 10% of total revenue for all periods presented.

Cognex machine vision is used to automate manufacturing and distribution processes in a variety of industries, where the technology is widely recognized as an important component of automated production and quality assurance. Virtually every manufacturer or distributor can achieve better quality and ~~manufacturing~~ efficiency by using machine vision, and therefore, Cognex products are used by a broad base of customers across a variety of industries, including logistics, automotive, consumer electronics, ~~automotive,~~medical-related, semiconductor, consumer products, and food and beverage, and medical-related. Cognex products are also used to automate distribution processes in the logistics industry, including for applications in retail distribution and e-commerce to scan, track, and sort goods through distribution centers.

The second quarter of 2020 was marked by a disruption to our business precipitated by the COVID-19 pandemic. In response, the Company's Board of Directors approved a restructuring plan intended to reduce the Company's operating costs and optimize its business model. As a result of this plan, Cognex recorded restructuring, intangible asset impairment, and excess and obsolete inventory charges totaling over $42 million in the second quarter of 2020. Unless indicated otherwise, these charges are reflected in applicable year-on-year comparisons. Additional detail on these charges can be found by referring to the Notes to the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.beverage.

Revenue for the ~~second~~first quarter of ~~2021~~2022 totaled ~~$269,158,000,~~$282,407,000, representing an increase of ~~59%~~18% from the ~~second~~first quarter of ~~2020, which was adversely impacted by global economic conditions related to the COVID-19 pandemic.~~2021. The increase ~~came from a broad base of industries, and most notably~~was driven by higher revenue from the logistics industry, as well as growth in the automotive, ~~and~~semiconductor, consumer electronics, and medical-related industries.

Gross margin as a percentage of revenue ~~improved to 75%~~was 72% for the ~~second~~first quarter of 2022 compared to 77% for the first quarter of 2021 due largely to higher inventory

purchase prices paid to secure strategic inventories during the global supply chain shortage. Operating expenses increased 10% from ~~70% for~~ the ~~second quarter of 2020,~~prior year primarily due to additional headcount to support higher business levels.

As a result of the lower ~~provisions for excess and obsolete inventories.~~

~~Operating expenses decreased by $16,774,000, or 13%,~~gross margin percentage, operating income declined to 31% of revenue for the ~~second~~first quarter of ~~2021~~2022 from 33% of revenue for the first quarter of 2021. Higher income tax expense further resulted in a decline in net income of 24% of revenue for the first quarter of 2022 compared to 29% of revenue for the ~~same quarter in 2020, as restructuring and intangible asset impairment charges of $34,369,000 recorded in the second~~first quarter of ~~2020 did not repeat. Excluding these charges,~~2021. These unfavorable impacts were partially offset by the favorable impact of the Company's stock buy-back program, that resulted in net income per diluted share of $0.38 for the first quarter of 2022 compared to $0.39 for the first quarter of 2021.

Results of Operations

As foreign currency exchange rates are a factor in understanding period-to-period comparisons, we believe the presentation of results on a constant-currency basis in addition to reported results helps improve investors’ ability to understand our operating ~~expenses increased by $17,595,000, or 19%, primarily due~~results and evaluate our performance in comparison to ~~higher incentive compensation costs and~~prior periods. We also use results on a constant-currency basis as one measure to evaluate our performance. Constant-currency information compares results between periods as if exchange rates had remained constant period-over-period. We generally refer to such amounts calculated on a constant-currency basis as excluding the impact of foreign currency exchange rate ~~changes, partially offset by savings from cost-cutting measures implemented~~changes. Results on a constant-currency basis are not in ~~2020.~~

~~Operating income expanded~~accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and should be considered in addition to, ~~34% of revenue~~and not as a substitute for, the second quarter of 2021 compared to an operating loss of 4% of revenue for the second quarter of 2020. Net income was 29% of revenue for the second quarter of 2021, or $0.43 per diluted share, compared to net loss of 1% of revenue for the second quarter of 2020, or $0.01 per diluted share.

~~Results of Operations~~results prepared in accordance with U.S. GAAP.

Revenue

Revenue ~~increased by $100,061,000, or 59%,~~ for the three-month period and increased by $171,853,000, or 51%, for the six-month period. This increase reflected a broad-based recovery from the COVID-19 pandemic, which most significantly impacted our business in the secondfirst quarter of ~~2020. Although~~2022 was $282,407,000, representing an increase of $43,380,000, or 18%, over the first quarter of 2021. Changes in foreign currency exchange rates did not have a material impact on total revenue ~~increased~~growth. The increase in revenue from the prior year ~~in all major industries we serve, the most significant dollar increases~~ came from ~~our three largest markets~~multiple industries, led by strong growth in the logistics industry from a variety of logistics, automotive, and consumer electronics. Included in our logistics growth is higher revenue from e-commerce customers that we believe may be benefiting from an online ordering trend that has grown since the COVID-19 pandemic.customers. Growth in ~~other~~the automotive industry, driven by electric vehicle investments, as well as the semiconductor, consumer electronics, and medical-related industries, also contributed to the increase ~~including higher~~in revenue. Additionally, revenue ~~from customers in~~

~~the semiconductor and medical-related industries.~~

~~Compared to~~for the first quarter of ~~2021, revenue increased by $30,131,000, or 13%, due largely~~2022 benefited from improved product supply conditions as compared to the ~~timing of revenue in the consumer electronics industry. Revenue for the second~~fourth quarter of 2021 ~~was modestly impacted by delays of customer deliveries for certain products due~~as orders requested to ~~global~~ship in the fourth quarter were delayed into the first quarter as supply ~~shortages.~~improved.

From a geographic perspective, revenue from customers based in the Americas increased by ~~57% for~~17% from the ~~three-month period and 67% for the six-month period~~prior year driven primarily by higher revenue in the logistics ~~industry, and to a lesser extent, from applications in medical-related and automotive industries.~~industry.

Revenue from customers based in Europe increased by ~~67% for~~10% from the ~~three-month period and 38% for~~prior year. Changes in foreign currency exchange rates resulted in a lower level of reported revenue in 2022, as sales denominated in Euros were translated into U.S. Dollars at a lower rate. Excluding the ~~six-month period as a result~~impact of ~~higher~~foreign currency exchange rate changes, revenue from customers based in Europe increased by 17% from the prior year. The increase came from customers in a variety of industries, most notably logistics, automotive, and logistics. Changes in foreign currency exchange rates accounted for approximately 10% of the revenue increase in both periods, and related to the translation of Euro denominated revenue to U.S. Dollars.medical-related.

Revenue from customers based in Greater China increased by ~~87% for~~27% from the ~~three-month period and 68% for the six-month period due largely to~~prior year. Changes in foreign currency exchange rates did not have a material impact on revenue. The increase was driven primarily by higher revenue in the consumer electronics, automotive, and ~~automotive~~semiconductor industries. A portion of the increase was driven by the timing of revenue in the consumer electronics industry, as there was a higher concentration of this revenue in the second quarter of 2021 compared to the second quarter of 2020. Changes in foreign currency exchange rates accounted for a relatively small percentage of the revenue increase in both periods, and related to the translation of Chinese Yuan denominated revenue to U.S. Dollars.

Revenue from other countries in Asia increased by ~~27% for~~24% from the ~~three-month period and 20% for the six-month period due primarily to higher~~prior year. Changes in foreign currency exchange rates resulted in a lower level of reported revenue in 2022, primarily from sales denominated in Japanese Yen and Korean Won. Excluding the ~~semiconductor~~impact of foreign currency exchange rate changes, revenue from these customers increased by 30% from the prior year, coming from a variety of industries, most notably logistics and ~~automotive industries.~~automotive.

As of the date of this report, we expect revenue for the ~~third quarter of 2021 to be higher than the~~ second quarter of ~~2021, due primarily~~2022 to ~~higher revenue from customers in~~be relatively consistent with or slightly lower than the ~~consumer electronics and logistics industries. Although we expect~~first quarter of 2022. On a sequential ~~increase in~~basis, we believe that higher revenue from the consumer electronics industry ~~we expect revenue from this~~will be offset by the timing of large projects in the logistics industry ~~to be lower than~~and slower spending trends in the ~~prior year. Our estimates for the third quarter of 2021 assume continued delays of customer deliveries for certain products due to global supply shortages.~~broader factory automation market.

Gross Margin

Gross margin as a percentage of revenue ~~was 75% and 76%~~decreased to 72% for the ~~three-month and six-month periods in 2021, respectively,~~first quarter of 2022 compared to ~~70% and 73%~~77% for the ~~same periods in 2020.~~first quarter of 2021. The ~~increase in the gross margin percentage~~decrease was ~~primarily~~almost entirely due to ~~lower provisions~~higher prices paid to purchase inventories, including higher costs for ~~excess~~components and ~~obsolete inventories as compared~~freight, due largely to global supply chain constraints. A relatively smaller portion of the ~~prior year. The higher provisions in 2020 took into account the global economic conditions resulting from the COVID-19 pandemic.~~

~~Gross margin as a percentage of~~decrease was due to less favorable revenue ~~would be relatively consistent for all periods presented excluding the provisions for excess and obsolete inventories, as manufacturing efficiencies related~~mix, primarily attributable to ~~the higher revenue level were partially offset by~~ a greater percentage of total revenue coming from the logistics industry, which has relatively lower gross ~~margins. In addition, we paid higher prices to purchase inventories~~margins and included some comparatively lower margins from strategic logistics projects in ~~the second quarter of 2021 due to global supply shortages that we expect to continue for the remainder of the year.~~2022.

As of the date of this report, we expect gross margin as a percentage of revenue for the ~~third~~second quarter of ~~2021~~2022 to be in the ~~low-to-mid 70% range, but likely lower than the 75% reported for~~low-70% range. The expected gross margin percentage reflects our expectations that higher inventory purchase prices will continue throughout and beyond the second quarter of ~~2021. We expect a sequential decrease due to lower margins from strategic logistics projects, as well continued higher inventory purchase prices.~~

2022.

Operating Expenses

Research, Development, and Engineering Expenses

Research, development, and engineering (RD&E) expenses increased by ~~$905,000,~~$1,949,000, or 3%6%, ~~for~~over the ~~three-month period and decreased by $936,000, or 1%, for the six-month period~~first quarter of 2021 as detailed in the table below (in thousands).

Three-month period Six-month period
RD&E expenses in 2020 $ 30,397 $ 66,343
Personnel-related costs (1,350) (2,637)
Stock-based compensation expense 554 (1,014)
Foreign currency exchange rate changes 1,215 2,565
Incentive compensation 789 1,551
Other (303) (1,401)
RD&E expenses in 2021 $ 31,302 $ 65,407


	Three-month period
RD&E expenses in 2021	$	34,105
Personnel-related costs	1,582
Stock-based compensation expense	582
Prototyping materials	580
Outsourced engineering services	428
Incentive compensation	(711)
Foreign currency exchange rate changes	(876)
Other	364
RD&E expenses in 2022	$	36,054

~~Personnel-related costs were lower~~RD&E expenses increased due to ~~a workforce reduction in the second quarter of 2020, partially offset by annual~~higher personnel-related costs due to headcount additions to support new product initiatives and salary increases ~~and higher fringe benefits~~ provided to employees. Stock-based compensation expense ~~decreased for~~was also higher than the ~~six-month period~~prior year due to ~~changes in equity awards over time (e.g., increased number~~a higher level of ~~restricted stock units, varied vesting schedules, etc.),~~stock-based grants at a higher average economic value, as well as the ~~cancellation~~impact of ~~awards resulting from~~a forfeiture rate true-up that resulted in higher expense. Higher spending on prototyping materials and outsourced engineering services also contributed to the ~~workforce reduction. This decrease was~~increase.

These increases were partially offset by ~~credits related~~lower incentive compensation expenses than the prior year. Relevant performance goals for these plans are set at the beginning of each year, with the ability to earn upside if the ~~workforce reduction that~~goals are exceeded. Performance goals set for 2021 incentive bonuses were ~~recorded in the second quarter of 2020 and did not repeat, the impact of which resulted in an increase in stock-based compensation expense for the three-month period.~~

~~Foreign currency exchange rate changes resulted~~exceeded, resulting in a higher level of bonus expense recorded in the first quarter of 2021. RD&E expenses ~~as compared~~were also lower than the prior year due to the ~~prior year,~~impact of foreign currency exchange rate changes, as costs denominated in foreign currencies were translated tointo U.S. Dollars at a ~~higher~~lower rate. ~~Incentive bonus accruals were higher than the prior year based on management's assessment of the Company's expected performance against relevant full-year goals.~~

RD&E expenses as a percentage of revenue were ~~12% and~~ 13% for the ~~three-month period and six-month period, respectively,~~first quarter of 2022 compared to ~~18% and 20%~~14% for the ~~same periods in 2020.~~first quarter of 2021. We believe that a continued commitment to RD&E activities is essential in order to maintain or achieve product leadership with our existing products and to provide innovative new product offerings, as well as to provide engineering support for large customers. In addition, we consider our ability to accelerate the time to market for new products to be critical to our revenue growth. This quarterly percentage is impacted by revenue levels and investing cycles.

Selling, General, and Administrative Expenses

Selling, general, and administrative (SG&A) expenses increased by ~~$16,690,000,~~$8,411,000, or ~~28%~~12%, ~~for~~over the ~~three-month period and $19,976,000, or 15%, for the six-month period~~first quarter of 2021 as detailed in the table below (in thousands).

Three-month period Six-month period
SG&A expenses in 2020 $ 60,153 $ 129,291
Incentive compensation 6,214 11,361
Foreign currency exchange rate changes 2,955 5,822
Business system investments 494 1,307
Marketing programs 702 971
Stock-based compensation expense 1,963 449
Personnel-related costs 603 (1,021)
Travel expenses 1,749 (195)
Other 2,010 1,282
SG&A expenses in 2021 $ 76,843 $ 149,267

The increase from the prior year was due to higher expenses related to annual incentive compensation plans, which include incentive bonuses and sales commissions. Incentive bonus accruals were higher than the prior year based on management's assessment of the Company's expected performance against relevant full-year goals. Likewise, sales commissions increased due to the higher business levels.


	Three-month period
SG&A expenses in 2021	$	72,424
Personnel-related costs	6,380
Stock-based compensation expense	2,387
Travel expenses	1,432
Sales demonstration equipment	1,311
Incentive compensation	(3,351)
Foreign currency exchange rate changes	(1,966)
Other	2,218
SG&A expenses in 2022	$	80,835

2724

~~Foreign currency exchange~~SG&A expenses increased due to higher personnel-related costs due to headcount additions, primarily for Sales personnel to support the company's revenue growth, and salary increases provided to employees. In addition to salaries and fringe benefits, these personnel-related costs included sales commissions and travel expenses related to the additional headcount. Stock-based compensation expense was also higher than the prior year due to a higher average economic value of stock-based grants, as well as the impact of a forfeiture rate ~~changes~~true-up that resulted in higher expense. While travel expenses increased due to the number of sales personnel added, they also increased due to a higher level of travel activity as restrictions related to COVID-19 continued to ease. Higher spending on sales demonstration equipment tied to new product launches also contributed to the increase.

These increases were partially offset by lower incentive compensation expenses than the prior year, which included sales commissions and incentive bonuses. Relevant performance goals for these plans are set at the beginning of each year, with the ability to earn upside if the goals are exceeded. Performance goals set for 2021 incentive bonuses were exceeded, resulting in a higher level of bonus expense recorded in the first quarter of 2021. SG&A expenses ~~as compared~~were also lower than the prior year due to the ~~prior year,~~impact of foreign currency exchange rate changes, as costs denominated in foreign currencies were translated tointo U.S. Dollars at a ~~higher~~lower rate. Expenses were also higher due to investments the Company is making in business systems related to its sales process, including systems to help our sales team more efficiently manage customer relationships and sales opportunities. A portion of these costs is expensed as incurred, while the majority of these investments will be accounted for as a capital asset that is expected to be placed into service in the first quarter of 2022. The Company also increased spending on marketing programs in an effort to generate future sales opportunities, particularly related to new product introductions. Finally, stock-based compensation expense increased due primarily to credits related to the workforce reduction that were recorded in the second quarter of 2020 and did not repeat, partially offset by decreases due to the impact of forfeiture rates revised in the first quarter of 2021 and changes in equity awards over time.

These increases were partially offset by lower personnel-related costs for the six-month period due to the workforce reduction, net of higher costs from annual salary increases and higher fringe benefits provided to employees. For the three-month period, there was a lesser impact due to the timing of the workforce reduction that took place on May 26, 2020. In addition, during the second quarter of 2021, the Company increased its sales headcount in strategic growth areas of the business. Travel expenses were slightly lower for the six-month period, but were higher for the three-month period, as restrictions related to COVID-19 that were still in place in the first quarter of 2021 were eased in certain regions in the second quarter of 2021.

~~Restructuring and Intangible Asset Impairment Charges~~

In the second quarter of 2020, the Company recorded restructuring charges totaling $14,798,000 as a result of actions related to the Company’s restructuring plan, which included a global workforce reduction of approximately 8% and office closures. In addition, the adverse impact of the COVID-19 pandemic triggered a review of long-lived assets for potential impairment in the second quarter of 2020. This review resulted in intangible asset impairment charges totaling $19,571,000 recorded in the second quarter of 2020.

Non-operating Income (Expense)

The Company recorded foreign currency losses of ~~$639,000 and $1,647,000~~$444,000 for the ~~three-month~~first quarter of 2022 and ~~six-month periods in 2021, respectively, compared to foreign currency gains of $336,000 and foreign currency losses of $2,667,000~~$1,008,000 for the ~~same periods in 2020.~~first quarter of 2021. Foreign currency gains and losses result primarily from the revaluation and settlement of ~~accounts receivable, accounts payable,~~assets and ~~intercompany balances~~liabilities that are ~~reported~~denominated in ~~one~~currencies other than the functional currency ~~and collected in another.~~of the Company, which is the U.S. Dollar, or its subsidiaries.

Investment income decreased by ~~$1,568,000,~~$86,000, or ~~48%~~6%, ~~for~~from the ~~three-month period and $5,243,0000, or 62%, for the six-month period.~~prior year. The decrease was due primarily to lower yields on the Company's portfolio of debt ~~securities.~~securities, partially offset by higher invested balances.

The Company recorded other expense of ~~$127,000 and $295,000~~$48,000 for the ~~three-month~~first quarter of 2022 and ~~six-month periods in 2021, respectively, compared to other income of $203,000 and $20,000~~$168,000 for the ~~same periods in 2020.~~first quarter of 2021. Other income (expense) includes fair value adjustments of contingent consideration liabilities arising from business acquisitions.

Income Tax Expense (Benefit)

The Company’s effective tax rate was ~~17% and 14%~~23% of pre-tax income for the ~~three-month~~first quarter of 2022 and ~~six-month periods in 2021, respectively, compared to a benefit of 51% of pre-tax loss and an expense of 7%~~11% of pre-tax income for the ~~same periods in 2020.~~first quarter of 2021.

~~The effective~~Discrete tax ~~rate~~items for the first quarter of 2021 included a decrease in tax expense of ~~$1,431,000 and $6,638,000 for the three-month and six-month periods in 2021, respectively, and $4,413,000 and $6,093,000 for the same periods in 2020,~~$5,207,000 related to stock options, primarily from the excess tax benefit arising from the difference between the deduction for tax purposes and the compensation cost recognized for financial reporting purposes from stock option exercises. This amount was not material for the first quarter of 2022. The Company cannot accurately predict the level of stock option exercises by employees or the Company's stock price in future periods.

~~Other discrete~~Discrete tax items for the first quarter of 2022 included an increase in tax expense of ~~$535,000~~$1,417,000 arising from an Internal Revenue Service (IRS) audit. Management expects to release reserves associated with the periods under audit in the second or third quarter of 2022 when the Company receives the Closing Letter for ~~both~~Agreed Income Tax Cases from the ~~three-month and six-month periods~~IRS, resulting in ~~2021, and~~a decrease in tax expense of approximately $2,400,000.

Discrete tax items for the first quarter of 2022 also included an increase in tax expense of ~~$3,267,000 and $3,509,000~~$1,734,000 to establish a full valuation allowance against deferred tax assets related to foreign tax credits. Should these credits be utilized in a future period, the allowance associated with these credits would be reversed in the period when it is determined that the credits can be utilized to offset future tax liabilities. Remaining discrete tax expenses for the ~~three-month~~first quarter of 2022 totaled $3,187,000 and ~~six-month periods in 2020, respectively, from the final true-up~~consisted primarily of ~~the prior year's tax accrual upon filing the related tax return.~~transfer pricing and return-to-provision adjustments.

Excluding the impact of these discrete items, the Company’s effective tax rate was ~~an expense~~16% of pre-tax income for the first quarter of 2022 and 18% of pre-tax income for ~~both~~ the ~~three-month and six-month periods in 2021, compared to a benefit~~first quarter of ~~1% of pre-tax loss and an expense of 19% of pre-tax income for the same periods in 2020.~~2021. The decrease in the effective tax rate ~~for the six-month period, excluding the impact of discrete items,~~ was due to ~~a lower percentage~~more of the Company's ~~pre-tax income~~profits being earned and taxed in lower tax jurisdictions, as well as higher estimated R&D tax ~~jurisdictions. There was an adjustment in the three-month period in 2020 to bring the year-to-date effective tax rate to 19%.~~

credit utilization.

Liquidity and Capital Resources

The Company has historically been able to generate positive cash flow from operations, which has funded its operating activities and other cash requirements and has resulted in an accumulated cash and investment balance of ~~$951,749,000~~$794,164,000 as of ~~July 4, 2021.~~April 3, 2022. The Company has established guidelines relative to credit ratings, diversification, and maturities of its investments that maintain liquidity.

The Company’s cash requirements for the ~~six-month period ended July, 4, 2021~~first quarter of 2022 were primarily met with positive cash flows from operations, as well as the sale and ~~the proceeds from stock option exercises.~~maturity of investments. Cash requirements consisted of operating activities, the ~~payment of dividends, the~~ repurchase of common stock, the payment of dividends, and capital expenditures. Cash flows from operating activities included ~~increases~~an increase in accounts receivable and inventories ~~related~~ to support higher business levels. The increase in inventories also resulted from the Company's initiative to secure key strategic components to meet customer demand, as well as carry higher stocking levels to mitigate the Company's exposure to demand changes or supply disruptions. The Company expects inventory levels to continue to increase for the remainder of the year as ~~we receive~~ inventory is received that wewas purchased in response to global supply chain challenges.

Capital expenditures for the ~~six-month period ended July 4, 2021~~first quarter of 2022 totaled ~~$6,550,000~~$4,585,000 and consisted primarily of computer hardware and software, as well as manufacturing test equipment related to new product introductions. ~~In 2021,~~During the first quarter of 2022, the Company ~~is making investments in~~placed into service new business systems related to its sales ~~process, the majority of which will be accounted for as a capital asset that is~~process. The Company expects to continue to make investments in its business systems intended to improve productivity or provide competitive advantages, although these investments are not expected to be ~~placed into service in~~material over the ~~first quarter of 2022.~~long term.

~~In October 2018,~~On March 12, 2020, the Company's Board of Directors authorized the repurchase of $200,000,000 of the Company's common stock. As of ~~July 4, 2021,~~April 3, 2022, the Company repurchased ~~3,075,000~~2,737,000 shares at a cost of ~~$142,225,000~~$200,000,000, under this program, including ~~258,000~~1,677,000 shares at a cost of ~~$20,877,000~~$117,000,000 during the ~~six-month period ended July 4, 2021, leaving a remaining balance~~first quarter of ~~$57,775,000.~~2022, which completed purchases under this program. On March ~~12, 2020,~~3, 2022, the Company's Board of Directors authorized the repurchase of an additional ~~$200,000,000~~$500,000,000 of the Company's common stock. ~~Purchases~~During the first quarter of 2022, the Company repurchased 202,000 shares at a cost of $13,405,000 under this ~~March 2020~~ program, ~~will commence upon completion~~leaving a remaining balance of ~~the October 2018 program.~~$486,595,000 as of April 3, 2022. The Company may repurchase shares under this program in future periods depending on a variety of factors, including, among other things, the impact of dilution from employee stock awards, stock price, share availability, and cash requirements. The Company is authorized to make repurchases of its common stock through open market purchases, pursuant to Rule 10b5-1 trading plans, or in privately negotiated transactions.

The Company’s Board of Directors declared and paid cash dividends of ~~$0.060~~$0.065 per share infor the first ~~and second quarters~~quarter of ~~2021,~~2022, totaling ~~$21,192,000.~~$11,303,000. Future dividends will be declared at the discretion of the Company's Board of Directors and will depend ~~upon~~on such factors as the Board deems relevant, including, among other things, the Company's ability to generate positive cash flow from operations.

The Company believes that its existing cash and investment balances, together with cash flow from operations, will be sufficient to meet its operating, investing, and financing activities for the next twelve months. In addition, the Company has no long-term ~~debt and does not anticipate needing debt financing in the near future.~~debt. We believe that our strong cash position has put us in a relatively good position with respect to ~~our~~anticipated longer-term liquidity needs.

New Pronouncements

Refer to Part I - Note 2 within this Form 10-Q, for a full description of recently issued accounting pronouncements including the expected dates of adoption and the expected impact on the financial position and results of operations of the Company.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to the Company’s exposures to market risk since December 31, ~~2020.~~2021.

ITEM 4: CONTROLS AND PROCEDURES

As required by Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, the Company has evaluated, with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, the effectiveness of its disclosure controls and procedures (as defined in such rules) as of the end of the period covered by this report. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer concluded that such disclosure controls and procedures were effective as of that date. From time to time, the Company reviews its disclosure controls and procedures, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that the Company’s systems evolve with its business.

There was no change in the Company's internal control over financial reporting that occurred during the quarter ended ~~July 4, 2021~~April 3, 2022 that ~~has~~ materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. We have considered the impact of COVID-19 on our internal controls over financial reporting. Personnel constraints related to working from home have made our ability to execute certain controls more challenging; however, we have enhanced existing monitoring controls in an effort to ensure we continue to have effective internal controls during this time.

3026

PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Various claims and legal proceedings generally incidental to the normal course of business are pending or threatened on behalf of or against the Company. While we cannot predict the outcome of these matters, we believe that any liability arising from them will not have a material adverse effect on our financial position, liquidity, or results of operations.

ITEM 1A. RISK FACTORS

For a list of factors that could affect the Company’s business, results of operations, and financial condition, see the risk factors discussion provided in Part I—Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table sets forth information with respect to purchases by the Company of shares of its common stock during the three-month period ended ~~July 4, 2021:~~April 3, 2022:

Total
Number
of Shares
Purchased Average
Price Paid
per Share Total Number of
Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs (1) Approximate
Dollar Value
of Shares that
May Yet Be
Purchased
Under the
Plans or
Programs (1)
April 5, 2021 - May 2, 2021 54,000 $ 85.21 54,000 $ 267,614,000
May 3, 2021 - May 30, 2021 52,000 77.74 52,000 263,535,000
May 31, 2021 - July 4, 2021 72,000 79.91 72,000 257,775,000
Total 178,000 $ 80.89 178,000 $ 257,775,000


	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
January 1, 2022 - January 30, 2022	1,562,000	$	70.14	1,562,000	$	7,482,000
January 31, 2022 - February 27, 2022	115,000	64.88		115,000	2,000
February 28, 2022 - April 3, 2022	202,000	66.21		202,000	486,595,000
Total	1,879,000	$	69.39	1,879,000	$	486,595,000

(1) ~~In October 2018,~~On March 12, 2020, the Company's Board of Directors authorized the repurchase of $200,000,000 of the Company's common stock. Purchases under this program commenced in October ~~2018.~~2021 and were completed in March 2022. On March ~~12, 2020,~~3, 2022, the Company's Board of Directors authorized the repurchase of an additional ~~$200,000,000~~$500,000,000 of the Company's common stock. ~~This new authorization will commence once~~Purchases under this program commenced in March 2022. The Company may repurchase shares under this program in future periods depending on a variety of factors, including, among other things, the ~~Company completes the October 2018 program, with repurchases subject to market conditions~~impact of dilution from employee stock awards, stock price, share availability, and ~~other relevant factors.~~cash requirements. The Company is authorized to make repurchases of its common stock through open market purchases, pursuant to Rule 10b5-1 trading plans, or in privately negotiated transactions.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

3127

ITEM 6. EXHIBITS


Exhibit Number
31.1						Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934*
31.2						Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934*
32.1						Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
32.2						Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
101.SCH						Inline XBRL Taxonomy Extension Schema Document*
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document*
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document*
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document*
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document*
104						Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)
*						Filed herewith
**						Furnished herewith

3228

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:

~~August~~May 5, ~~2021~~2022

COGNEX CORPORATION

By:

/s/ Robert J. Willett

Robert J. Willett

President and Chief Executive Officer

(Principal Executive Officer)

By:

/s/ Paul D. Todgham

Paul D. Todgham

Senior Vice President of Finance and Chief Financial Officer

(Principal Financial Officer)

3329


	One-time Termination Benefits		Contract Termination Costs		Other Associated Costs		Total
Balance as of December 31, 2020	$	1,624	$	750	$	15	$	2,389

Cash payments	(1,117)		(131)		(15)		(1,263)


Foreign exchange rate changes	0		(3)		0		(3)
Balance as of July 4, 2021	$	507	$	616	$	0	$	1,123


	Three-month period		Six-month period
RD&E expenses in 2020	$	30,397	$	66,343
Personnel-related costs	(1,350)		(2,637)
Stock-based compensation expense	554		(1,014)
Foreign currency exchange rate changes	1,215		2,565
Incentive compensation	789		1,551
Other	(303)		(1,401)
RD&E expenses in 2021	$	31,302	$	65,407


	Three-month period		Six-month period
SG&A expenses in 2020	$	60,153	$	129,291
Incentive compensation	6,214		11,361
Foreign currency exchange rate changes	2,955		5,822
Business system investments	494		1,307
Marketing programs	702		971
Stock-based compensation expense	1,963		449
Personnel-related costs	603		(1,021)
Travel expenses	1,749		(195)
Other	2,010		1,282
SG&A expenses in 2021	$	76,843	$	149,267